By Adam Pagnucco.
Question: When is a budget cut not a cut?
Answer: When it’s a phantom cut! That means a cut existing only on paper because the item in question will at some point be spent.
The county council recently constructed Exhibit A of a phantom cut in its passage of the FY24 budget. The ghost reduction originated in the county’s utility budget. County Executive Marc Elrich requested a $9.6 million increase in utility spending, a 42% increase, in part because of rising energy costs. His budget stated:
Increased utilities expenditures result primarily from greater consumption due to new facilities or services, facilities reopening after COVID closures, increased rates, and in some cases a more precise alignment of budgeted costs with actual prior year expenditures by utility type. Energy conservation and cost-saving measures (e.g., new building design, lighting technology, energy, and HVAC management systems) help offset increased utility consumption and higher unit costs. Renewable energy includes the purchase of credits to offset fossil fuel purchases.
That’s a big increase, sure. But energy costs have been rising all over the world and the executive branch has little control over them. Unless peace is declared in Ukraine, Russian oil begins to flow freely, Saudi Prince Mohammed bin Salman decides to open his spigots to get Joe Biden reelected and the world enters another Great Recession, we are going to pay more in energy costs.
The council originally placed this $9.6 million on its high priority reconciliation list, meaning that it had a decent chance of getting funded. But when the final reconciliation list came out, POOF it was omitted. That means the money is not in the final budget.
So what happens now? We are going to pay this money even if it is not in the budget. The county executive may send over a supplemental appropriation which of course the council will approve. And then the money will come out of reserves. Both Elrich and Council Member Kate Stewart alluded to this in their budget statements. And they’re right.
Now this won’t break the bank. Our reserves are at historically high levels. But this could be a recurring cost, at least until the next deep worldwide recession leads to less demand for energy. And our reserves won’t always be so high. In the meantime, the phantom cut did enable the council to cut its property tax rate by 0.4 pennies. Honest budgeting would have produced a property tax increase of 5.1% instead of 4.7%.
It’s not the end of the world, but for a council facing a structural deficit next year, it’s not a good look. If there must be cuts, let’s have real ones and send the phantoms to the cemetery where they belong.