Tag Archives: cash reserves

Rainy-day fund in Pr. George’s is at its lowest point in several years & Baker refuses to take responsibility.


Prince George’s County Executive Rushern Baker III has not done a good job as a county executive. High level of mismanagement and plain sight corruption includes among other issues $10 million for “snow removal” which drove the deficit to $62.5 million. This suspicious activities are not helping the county. The effects of corruption on Prince George’s County socio-political and economic development are myriad. Prince George’s County Government officials have been shifting government expenditures to areas in which they can collect bribes easily, it appears.

The rainy-day fund maintained by Prince George’s County is at its lowest level in more than five years after county officials’ withdrawal of money to cover budget shortfalls, snow removal and economic-development incentives.

County Executive Rushern L. Baker III (D) and the County Council each blame the other for the depletion, with Baker officials saying the council should have approved cost-saving furloughs and layoffs in recent years while county lawmakers say the executive branch should have shelved other priorities to save money.

The county has $4 million in cash reserves, down from $116 million in 2010 and $22 million in 2014. The latter amount was enough to maintain the AAA bond rating that allows Prince George’s to borrow money relatively cheaply.

County officials say they want to build the fund back up to $30 million in coming years — enough to cover emergencies and ensure that the bond rating will remain strong.

“We are really concerned, because there is no more cushion,” said Thomas Himler, the county’s budget administrator. “It’s like having someone who makes $100,000 annually but only has $140 in their savings account. . . . That is where we are, and it’s not a good place.”

The county safeguards 7 percent of its annual operating budget in an “economic stabilization fund,” which cannot be touched except in cases of extreme and dire emergency. There is about $200 million in that fund.

The remaining cash reserves include whatever other revenues exceed expenditures. That is the fund from which officials have withdrawn $65 million over the past two years to cover shortfalls and one-time expenditures, and it is the fund that county officials say must now be replenished.

“The truth is that it doesn’t matter how we got here, because we are here,” said council member Andrea Harrison (D-Springdale).

But she and other council members have balked at furloughs and layoffs included in Baker’s latest budget proposal, which will go to a council vote on Thursday.

Council members say they will definitely not agree to fire or furlough county workers as a way to curb spending.

“Nobody has an appetite for furloughs,” Baker said. “I campaigned on not doing furloughs,” he added. But then he held up two fingers close together and said Wall Street was “this close” to reducing the county’s credit rating.

The county is still reeling from the recession and foreclosure crisis, which sapped much of the collective wealth of the nation’s most affluent majority-black jurisdictions. Property values are sluggish, and so far, Baker has failed to generate widespread support for his proposal to raise the tax rate as a way to increase funding for public schools.

The county is at “such a low point that we risk losing our Triple-A bond rating,” Baker said. “We have to make do with what we have.”

Previous county executives balked at withdrawing money from the reserve fund, especially for ongoing costs. In 2009, then-county executive Jack Johnson (D) refused to use reserves to plug budget gaps, opting instead for a hiring freeze and furloughs. Before Johnson, Wayne K. Curry (D) vowed to set aside a percentage of county revenue for cash reserves and resisted pressure from the council to spend that money on other things.

Baker’s aides say that initially he, too, was reluctant to dip into cash reserves. But consecutive years of spending cuts and unforeseen expenses have left the county without good options, they added.

Baker and the council tapped the fund to cover millions of dollars in cost-of-living payments to police officers after an arbitrator ruled that the county’s pay freeze was unlawful.

The fund was tapped again after snow removal cost millions more than expected during the winter of 2013-14. And it was used to fund economic-development incentives for private companies.

In addition, after teacher pension costs were shifted from the state to counties in 2012, it became harder to set aside money for the reserve fund, officials said.

David Jacobson of the ratings agency Moody’s said that Prince George’s has historically had a “stable financial position” and so far has not reported numbers that have caused worry. But the agency has not yet analyzed the 2015 numbers.

When ratings agencies assess cash reserves, they are interested in whether a local government can meet its debt obligations with the money it has or generates, said George Mason University’s Frank Shafroth.

If elected officials are taking money out of reserves, the salient question might be not how much they are withdrawing but for what purpose.

At the same time, the ratings agency Fitch did issue this warning in 2014, when the reserves had dipped to $22 million: “Failure to improve financial performance by adhering to structurally balanced budgets and stabilizing reserves would likely result in negative rating action.”

By Arelis Hernández covers Prince George’s County as part of The Washington Post’s local staff.