For the second year in a row, Baltimore County government will dip into surplus money to pay for ongoing operations, but will continue to avoid tax increases.

County Executive Kevin Kamenetz announced his $2.6 billion budget Thursday morning in the County Council chambers.

The proposal for the year beginning July 1 is expected to include about $1.6 billion in general fund spending, about $60 million of which will come from a reserve account.

"What message I have been trying to send over the last several weeks is the realities that we are facing," Kamenetz told reporters during a briefing Wednesday.

This is Kamenetz's first budget as county executive, but he worked on 16 budgets previously during his four terms on the council.

"I've seen trends take place over the past 16 years," Kamenetz said. "We've had tough times, mostly good times, but at no time have we had a scenario where we had declining revenues. That's the reality today.

"Our expenses exceed our revenues," he added.

Kamenetz said his priority is to "deliver the basic services that residents expect from local government."

The Pikesville Democrat said his first budget as county executive will contain no increases in income or property taxes. Neither have been increased in 19 and 23 years, respectively.

Other than $1.2 million in business and liquor license fee increases passed by the General Assembly at Kamenetz's request, the budget also contains no other fee increases.

Kamenetz's proposed general fund budget of $1.6 billion is less than 1 percent more than the current budget. The portion of the budget subject to the county's Spending Affordability Committee guidelines would also grow by a fraction, and under the limit set by the committee. In January, the committee set a limit of $1.63 billion—an increase of about 2.2 percent over the current year's spending.

This is the second year the county will rely on surplus money to balance its budget. The amount of surplus called for in the proposed budget is seven times more than what is needed in the current budget.

Last year, County Executive Jim Smith proposed a budget that contained about $9 million in surplus funds for spending. Kamenetz is proposing spending $60 million in surplus funds.

The proposed drawdown in Kamenetz's budget is a departure from one of the bedrock tenets of Baltimore County financial management over the past 20 years. In that time, county executives have been more than reluctant to use the county's undesignated surplus to pay for ongoing operational expenses, fearing that such spending would create a deficit situation.

"We jealously guarded [the surplus] and we guarded it for this very reason," Kamenetz said.

The surplus money the county will use comes from an account that is separate from the county's so-called rainy day fund. That account holds the equivalent of more than 5 percent of county revenues. It's meant to ensure that the county can pay its bills in a severe economic downturn.

Keith Dorsey, the county's budget director, said the county expects to have about $214 million in surplus money between the two accounts.

Typically, the money in the undesignated surplus account has been used to pay for one-time capital expenses.

"This is the first time we're really digging into that reserve to pay for those ongoing costs that are there," Dorsey said.

"The good news is this is why that money is there," Kamenetz said.

Even after the drawdown of reserves, Dorsey said, the county should end fiscal year 2012 with about $153 million in its surplus accounts, equal to about 10 percent of county revenues.

Income Tax Revenue Flat, Property Tax Revenue Decreasing

But, the county executive said he expects more difficult times ahead.

"Hard decisions have to be made and we're going to make them and still provide the core services our citizens demand and expect," Kamenetz said.

Decreasing home assessments that are driving down property tax collections and income tax revenues have already driven the county to the point where it spends more money than it takes in.

Kamenetz said the county will not lift its 4 percent cap on property tax assessments but said declines in housing values statewide and in the county are starting to reduce the amount of taxes collected.

"If this trend continues, it will go below what we are currently taxing," Kamenetz said.

Last year, the cap saved taxpayers about $170 million. This year, it will save county homeowners nearly $60 million less.

In an interview with Patch, Kamenetz said he is loath to increase either the income or property taxes during his term, but stopped short of making a promise.

"I haven't raised taxes in 17 years," Kamenetz said. "It's not a streak I am looking to end."

Salaries, Benefits 'A Staggering Number'

Kamenetz's proposed budget also contains no raises for unionized employees, but does guarantee step and longevity increases for about 25 percent of the 8,000 general government employees.

There are no expected furloughs or layoffs in the coming year, but about 41 jobs will be eliminated through the cutting of vacant positions or by transferring employees into other jobs.

Kamenetz announced the elimination of more than 140 positions through similar means and the consolidation of four departments into other agencies just before taking office in December.

"My first week in office, my goal was to see where we could do better with less," he said.

The proposed county budget would not restore nearly 200 teaching positions that are expected to be eliminated by Baltimore County Public Schools. County legislators and the council had hoped the positions would be restored when Kamenetz delivered his budget message.

Kamenetz said last week that in addition to nearly $16 million to pay for the positions, he would need to find an additional $9 million to cover other health care costs passed down by the state during the most recent General Assembly session.

The moves have reduced the number of general government employees to the lowest levels in 25 years. The changes saved the county about $8 million, Kamenetz said.

Salaries, benefits and health care of general government employees account for about 70 cents of every tax dollar, Kamenetz said.

"It's a staggering number," Kamenetz said. "We have to be ever vigilant about that expense."

Focusing on Infrastructure

Kamenetz said his $659 million capital budget proposal is focused on county infrastructure—roads, bridges, curb and gutter repair, as well as school construction and renovation.

"I think those are the appropriate priorities there," he said.

Capital budget spending. Source: county executive's office