Baltimore Tightens Its Budget Belt. URBAN FINANCIAL WOES

ON the same day last month that the mayor of Baltimore unveiled what is perhaps the most austere budget in the city's history, the chief executive of nearby Howard County announced a 16.9 percent spending increase for fiscal 1990. That, in a nutshell, is what has been happening to Baltimore and a number of other older, industrial cities in the past few years. While revenue levels have declined or remained constant, the demand for city services has grown. At the same time, and for similar reasons, many neighboring suburban jurisdictions have been thriving.

On the revenue side, Baltimore has been hit hard by a number of factors, including the loss of thousands of middle-class residents to the suburbs and a 46 percent reduction in federal assistance since 1980. Despite a nationally recognized downtown redevelopment program, the value of the city's property tax base has actually declined by 29 percent, when adjusted for inflation, since 1970.

As a result, according to Mayor Kurt Schmoke, ``We're running hard just to maintain the same level of services.'' Because Baltimore has been afflicted with the same problems as other urban areas, including drug-related crime and violence, the price tag for providing those services has grown. The city's per capita cost for police and fire protection, for example, is nearly twice the state average.

Mayor Schmoke, who says his main task is to try to ``manage scarcity,'' was forced to request some $10 million in increased fees and ``nuisance'' taxes just to balance the city's budget. Even with the new fees, and the highest property-tax rate in the state, it is projected that several city agencies will run deficits during the next fiscal year.

``We used to rely on federal revenue sharing to balance the budget,'' Schmoke says. But that program, under which Baltimore received $23 million in 1986, was terminated under the Reagan administration.

According to Helen Ladd, a Duke University political scientist, most of the aging cities in the Northeast and Midwest are experiencing similar financial constraints. ``They might be able to balance their budgets, but the question is where they have to make cuts or impose new taxes to do it,'' she says.

Dr. Ladd, who recently wrote a book on the fiscal condition of US cities, says she believes that there are ``much more powerful forces at work than the loss of federal dollars.'' Many cities, she says, ``simply are structurally unable to keep up with the growing needs of their residents.''

Meanwhile, suburban area governments have benefited from the trends that have strained Baltimore's budget. The arrival of middle-class emigrants from the city has helped to boost housing demand, which has expanded the real estate tax base. In addition, the income earned by residents who commute to jobs in Baltimore is taxed by the suburban jurisdiction, not the city.

With federal aid drying up, Baltimore officials have begun to look more to the state of Maryland for assistance. ``We are trying to establish a new relationship with the state to offset the loss of federal funds,'' says Edward Gallagher, the city's budget director.

So far, the state's response to Baltimore's fiscal crisis has been ``adequate,'' according to one city official. But for the future, the city seems to be pinning its hopes on a state commission that has been charged with examining the economic disparities that exist among local governments.

The commission's executive director has already indicated that the panel might recommend long-term relief for Baltimore.