Dire predictions of reduced tax revenue for Baltimore as a result of mass layoffs of federal employees living within city limits did not prove accurate, city officials reported this week as they presented year-end financial data to the Baltimore City Council.

Instead, Baltimore finished the fiscal year, which ended June 30, with $42 million more in income tax collections than budgeted. The revenue stream was one of several that overproduced, giving the city $66 million more than anticipated.

Baltimore ended fiscal year 2025 collecting $13.1 million more than it budgeted to spend.

Baltimore’s final outlook stands in stark contrast to the picture painted in April when city finance officials sounded the alarm and imposed a spending freeze on numerous departments as the end of the fiscal year loomed.

City officials said at the time they were anticipating a sharp reduction in income tax growth based upon buyouts and layoffs happening to the federal workforce, much of which lives in Maryland. Baltimore officials estimate that at least 12,000 federal workers live in the city.

Income taxes are collected by Maryland and distributed to local jurisdictions based on a formula. At the end of the fiscal year, the state issues each jurisdiction their share of “unallocated withholdings,” said Laura Larsen, the city’s budget director. This year’s end-of-year payment to Baltimore was $27.4 million, more than double the amount the city budgeted and more than the city has received on average over the last five years.

“The state is the owner of the data,” Larsen said during a meeting of the council’s Budget and Appropriations Committee. “We have to rely on the level of data we are receiving back from the state to build our projections.”

Larsen said city officials are still looking closely at income taxes for the current fiscal year, which began in July, and they remain an indicator of what’s happening with the job market. She cautioned that the impact of federal layoffs could still be felt over the next one to two years.

The city spending freeze, implemented in April, proved ineffective for several of the biggest departments driving overspending, data presented Tuesday showed. Agencies trending over budget were subjected to additional reviews of discretionary overtime and contractual spending during the freeze. City-issued credit cards were suspended except for agency directors.

Public safety agencies, including the Police Department and Fire Department, were subject to the freeze, as were Recreation and Parks and the city’s Sheriff’s Office. All four agencies still finished the year over budget. Police ran a $47.5 million deficit, while the Fire Department finished the year over budget by $38.5 million. Recreation and Parks was $5.6 million over budget. The sheriff overspent by $3.4 million.

Overruns were driven in large part by increased wages for police and firefighters that were still being negotiated when the budget was approved. Overtime spending was also a major factor.

Councilwoman Danielle McCray, chairwoman of the committee, questioned what the Fire Department is doing to rein in overtime spending, which has been driven in part by a shortage of paramedics.

Larsen said the city has had an easier time attracting EMTs than paramedics, so some advanced life support units are being downgraded to basic life support units. The city has also been contracting for EMS assistance, a service that is funded in the current budget but was not the previous year.

The spending freeze did work for some agencies, Larsen noted. The Finance Department ended the year with a surplus as did the Mayor’s Office of Homeless Services.

Councilman Paris Gray questioned whether the delivery of city services was affected by the freeze. Larsen said no. In the Mayor’s Office of Homeless Services, budget officials worked with agency officials to find items that were charged to the city’s general fund but should have instead been budgeted for grant or capital funds, she said.