Amid U.S. Debt Crisis, Ulman Calls on Maryland Counties to Prepare for Worst

With President Obama declaring the debt crisis in its “11th hour,” Howard County Executive Ken Ulman–president of the Maryland Association of Counties—is calling on municipalities across the state to review their finances.

“The responsible thing for counties to do is review their books and prepare for the worst,” Ulman said in a statement.

Ulman held a conference call with Maryland’s county financial officials this week to encourage jurisdictions to brace for the possible default of U.S. debt and any fallout in the financial sector.

“This stalemate poses real risks to residents of Howard County and Maryland who are employed by the federal government or who rely on Social Security and other benefits for survival,” Ulman said.

Maryland is home to numerous government employees and Ulman expressed concern that disruptions of federal programs would also have negative effects on local government and business. He noted that a drop in federal government activity could significantly decrease income tax revenues–the second largest source of tax revenue behind property taxes.

Howard County, which received a AAA bond rating from all three rating agencies for the past 14 years, could also face higher borrowing rates. Moody’s Investor Service announced re-evaluations of thousands of AAA-rated state municipal bonds.

According to Bloomberg.com, Maryland is also one of five states that Moody’s is reviewing for a possible downgrade.

“We are in new territory here and no matter how much prudence and due diligence we might have brought to the table, no one could capably prepare for such an event,” said Howard County spokesperson Kevin Enright.

Enright said municipalities like Howard County plan spending under the assumption that the federal government will not default or downgrade its debt.

“Costs of preparing for the once remote possibility of the downgrade of U.S. government debt … would have been considered an imprudent and unnecessary expenditure of public funds,” Enright said.

According to Enright, Howard County’s self-review is focused on “immediate” and “near-term” risks to the county’s bond rating, which take into consideration a jurisdiction’s level of unemployment, direct support for public medical facilities, variable rate debt and interest rate exchange agreements, amount of U.S. government agency securities holdings, Medicare and Medicaid obligations, and the jurisdiction’s fund balance.