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The county's budget gap has grown to about $520 million due to declining tax revenues during the first six months of the fiscal year, as the recession continues to hit all facets of the economy.

County finance officials briefed County Council members Tuesday in a multipronged financial update that included a fiscal analysis of the second quarter of fiscal 2009 and the impact of the federal stimulus package on the county's finances.

The county's revised deficit — up from $450 million — is due, in large part, to less than expected income tax revenue associated with the stock market, as well as less in taxes associated with the housing market. Combined revenues from recordation and transfer taxes — paid when property is bought and sold — was down almost 21 percent for the first six months of the current fiscal year, July through December 2008, compared with the same time in fiscal 2008. The taxes also fell lower than revenue projections for January 2009.

The declining revenues resulted in a $70 million write-down in revenue estimates over fiscal 2009 and 2010, said Jennifer Barrett, the county's finance director.

The dropping revenues are similar to declines experienced by other jurisdictions in the region and throughout the country. Fairfax County has a $650 million budget deficit.  Prince George's County faces a $132 million deficit.

Also, capital gains tax revenues associated with more affluent, late income tax filers have dropped. Past budgets that included the infusion of these revenues will have to be revised in the future, Barrett said. Fortunately, the county is still faring better than many jurisdictions because of its strong salary and wage base, despite the current recession, she said.

The county's fiscal 2010 budget deficit originally hit $515 million last year before County Executive Isiah Leggett implemented a countywide savings plan and other cost-cutting initiatives that lowered the gap to $450 million.

Leggett (D) is scheduled to release his fiscal 2010 budget March 16. By law, the county's budget must be balanced.

Thus far, county officials have not included possible stimulus funding in budget numbers.

"This [stimulus funding] is intended as short-term money," said Kathleen Boucher, the county administrator leading the county's stimulus efforts. "This will not exist in two years. So the question is how you make good decisions in the long run."

Some 184 potential opportunities exist in the package of stimulus funds that the county can apply for, county officials said. Those opportunities total about $738 million.

Leggett has maintained a long-term approach to any stimulus money that could come to the county. He has not called off plans for possible unpaid employee furlough days or other savings plans.

"The stimulus will help some, but it will be the county's actions that will help stem the budget gap in the next years," said council President Philip M. Andrews (D-Dist. 1) of Gaithersburg,

Thus far, most of the information relating to the county's portion of federal stimulus funds has pertained to education funds.

The county school system will receive $21.4 million in federal stimulus money to expand services for students with special needs ($15.3 million) and to provide more support for Title I elementary schools ($6.1 million), which have the most economically disadvantaged students. The number of those schools will increase from 27 to 30 schools.

With the additional federal dollars, the school system will be able to expand the Head Start program to a full day in those schools and will restore some teacher positions to reduce class size, according to school system information.

As for special education, the school system will add hours-based staffing to 15 middle schools and restore 20 elementary school special education teaching positions, among other measures.

The stimulus funds also will allow the system to restore about $2.1 million in funding for the Middle School Magnet Consortium, staff development and reading specialists that had been cut out of the fiscal 2010 budget proposal.

The county is also on tap to receive a portion of $365 million in transportation funds for projects such as repaving a portion of Interstate 270.