Maryland Is Increasing Support for Schools, but Must Address Remaining Obstacles

When Maryland students return to school this fall, it will be the state’s second year phasing in the historic Blueprint for Maryland’s Future school funding reform. Both Gov. Moore’s budget proposal and the adopted state budget faithfully implement the Blueprint reforms, which means that scheduled funding boosts will proceed normally. However, rapid inflation, varying enrollment trends, and a change to the way the state measures student poverty combine to make this year’s school funding picture more complicated than most.

This post will take you through the highlights. But first, here are the steps policymakers should take now to invest in children across Maryland:

• Lawmakers should ensure that recent years’ rapid inflation does not lead to persistent school underfunding. To do this, they should amend the Blueprint to update per-pupil funding levels for the economy’s new, higher price level. They should also consider building in real-time inflation adjustment.
• Policymakers should advance equity today by accelerating the phase-in of powerful Blueprint elements like concentration of poverty grants. They should also continually monitor funding equity, on a need-adjusted basis.
• New revenue is key to sustaining our investments in Maryland children. Lawmakers should enact long-overdue tax reforms like closing corporate tax loopholes, reforming our income tax, and asking more of those whose income comes from wealth rather than work.
• State lawmakers should raise the cap on local income tax rates to ensure that local jurisdictions like Baltimore City and Dorchester County can afford to meet their Blueprint school funding responsibilities.

2023–2024 Maryland Education Funding: Key Facts

1. Due in large part to the Blueprint reforms, nearly all school districts will get more support from the state in the 2023–2024 school year than they did five years ago, adjusted for enrollment and inflation.

• Increases range from 2% in Queen Anne’s County to 22% in Talbot County, comparing FY 2024 to FY 2019. In dollar terms, the increases range from $120 per pupil (2023 dollars) in Queen Anne’s County to $1,738 per pupil in Somerset County.
• There is one exception. While unadjusted state aid to Allegany County schools increases by $13 million over this period, this is not enough to keep up with recent years’ rapid inflation, leaving the district with 2% lower state aid per pupil in real terms.

You can use the map below to explore trends in inflation-adjusted per-pupil funding.

2. For the first time, the state is implementing an improved data system that uses Medicaid enrollment data to identify students with low family incomes, similar to an existing system based on SNAP (food assistance). This means more students will receive free or reduced-price meals at school, and is also driving larger-than-expected increases in state aid to some districts.

• Schools in Cecil, Charles, Harford, Prince George’s, St. Mary’s, and Worcester Counties are seeing their inflation-adjusted state aid per pupil go up by more than 7%.
• The long-term consequences of this change remain to be seen. To the extent that the data match is identifying students with low family income who were simply missed by the old system – meaning that we have been systematically underestimating student poverty for years – this will mean sustained higher funding. However, federal pandemic relief policies have also temporarily increased Medicaid enrollment, meaning that these policies’ expiration could reduce the impact of the data match in future years.

3. This year brings big shifts in local funding responsibilities. Seventeen counties have minimum FY 2024 school funding responsibilities less than the amount they contributed in FY 2023 – before adjusting for enrollment or inflation.

• These decreases are partly driven by a temporary change to “maintenance of effort” requirements that prevent counties from offsetting higher state aid to schools with lower local contributions. Still, adjusted for enrollment and inflation, most counties’ FY 2024 school funding obligations are below their contributions from five years earlier.
• If counties fund schools at the minimum required level, two-thirds of the state’s school systems will see their combined state and local funding levels go down from FY 2023 to FY 2024 (adjusted for enrollment and inflation). In half the state’s school systems, declining local responsibilities more than offset increasing state aid.
• Importantly, these changes affect only the minimum amount counties are required to pay under state law. Local policymakers have the option to contribute more.

4. Meanwhile, Dorchester County is required to increase its public schools appropriation by about 11% (per pupil, inflation adjusted), and Baltimore City must increase its contribution by nearly 22%.

• This increase is partly an expected result of the way local funding responsibilities are calculated under the Blueprint. Historically, counties were required to fund only their share of the “foundation” per pupil formula. The other formulas (compensatory education, special education, and English learners), which allocate additional funding based on students’ educational needs, also included a “local share” – but there was no requirement that counties fund it. Under the Blueprint, local funding responsibilities are gradually increasing to include the local share of all funding formulas.
• Another factor increasing Baltimore City’s school funding responsibility is a significant drop in its “educational effort adjustment” – a state aid component meant to prevent excessive local funding responsibilities. However, because the funding formulas adjust local shares for each jurisdiction’s level of wealth, the city’s $5,636 per pupil funding responsibility is still well below the state average ($8,600).
• Both Baltimore City and Dorchester County currently levy the maximum allowed local income tax rate of 3.2%. Increasing the state cap would allow these jurisdictions to ask more of their wealthiest residents and thereby invest more in education. Legislation passed in 2021 allowed local jurisdictions to set different rates for different income levels, allowing for a more equitable tax structure, but maintained the existing cap. That meant most local governments can’t adopt a more equitable income tax without losing revenue. State lawmakers should raise the cap on local income tax rates.

5. Rapid inflation in recent years has weakened the Blueprint’s early impact – and, if lawmakers don’t act, even a temporary inflation spike will do permanent harm.

• During the 12-year phase-in period, the Blueprint law sets each year’s per pupil funding level for most formula grants in dollar terms. This phase-in schedule incorporates both lawmakers’ intended increase in real education funding and assumptions about how quickly prices would rise in future years. This means that when inflation spiked in 2021 and 2022, the formula did not update in real time, resulting in a loss in purchasing power.
• For the most part, the Blueprint phase-in schedule is based on economic expectations as of early 2020, before the pandemic’s impacts were known. At the time, the Congressional Budget Office expected consumer prices to increase by about 10% between calendar years 2020 and 2024. CBO is now projecting a 19% price increase during that period. This means that the purchasing power of each dollar of 2024 education funding is about 7% less than lawmakers intended.
• While inflation has already slowed considerably and is expected to gradually return to pre-pandemic levels, the cumulative nature of inflation means that price levels will still be higher than anyone expected a few years ago. This means that the Blueprint law’s rigid phase-in schedule now effectively bakes in permanent underfunding.
• Lawmakers should amend the Blueprint to update per-pupil funding levels for the economy’s new, higher price level. They should also consider building in real-time inflation adjustment by specifying the intended inflation-adjusted percentage increase in per-pupil funding (rather than the total dollar amount) for each year of the phase-in.

6. We should fund public schools in a way that builds opportunity for all. But historically, Maryland’s school funding system has heightened structural barriers created by racism and economic hardship. The Blueprint represents significant progress on building a more equitable school funding system, but there is still work to do.

• An equitable school funding system does not simply mean that we invest the same number of dollars per pupil across the state. Students face different barriers and have different needs – depending on whether they spent their early years under the constant stress that comes with economic hardship, they grew up in a segregated or disinvested neighborhood, or they have a disability or are learning English. Our funding formulas recognize this, allocating additional funding based on students’ needs.
• But the Blueprint’s 12-year phase-in means that the state is not yet funding schools at the level the funding formulas call for. And unequal wealth makes it easier for some counties to make up the difference, harder for others. As a result, some school systems are closer to the intended, need-adjusted funding levels, while others are further behind.
• Moreover, this funding distribution has historically been “upside-down” in two important respects: As of FY 2019, school systems with higher school-age poverty rates, and systems with higher shares of Black students, were less sufficiently funded, on average.
• With the improvements brought by early Blueprint implementation, we have measurably improved school funding equity along economic lines, cutting nearly in half the degree of underfunding associated with high school-age poverty rates. So far, the data are less clear on our progress improving racial equity. The measured level of underfunding associated with high shares of Black students has declined considerably, but this change is not statistically meaningfully by conventional standards.
• But we still have not yet built a truly equitable school funding system. For example, as of FY 2024, a school district with a school-age poverty rate of 22% would, on average, be 1.3% less well-funded than one with a 20% school-age poverty rate (adjusted for need). The data also suggest that funding may be upside-down with respect to the share of Black students, Latinx students, and total students of color, although these relationships are smaller in magnitude and not statistically distinguishable from zero.
• Policymakers can advance equity by accelerating the phase-in of powerful Blueprint elements like concentration of poverty grants. They should also continually monitor funding equity, on a need-adjusted basis.

7. New revenue is key to sustaining our commitment to providing a great education to every child in Maryland. Without new revenue, we will fall billions short of fully funding the Blueprint – or be forced to slash other essential services – before the end of the decade.

• Although we have seen explosive revenue growth and massive surpluses in recent years, expiring federal pandemic relief and the Federal Reserve’s campaign to slow economic growth have brought this era to an end. State revenues are expected to grow slightly more slowly in coming years than they did before the pandemic.
• While lawmakers have designated significant ongoing revenues to fund the Blueprint – and Gov. Moore and the General Assembly set aside a combined $900 million in this year’s budget to boost the Blueprint Fund’s balance – the Blueprint fund is currently expected to run out of money by FY 2027. General fund contributions to make up the difference are expected to drive structural deficits of $384 million in FY 2027, $1.8 billion in FY 2028, and almost certainly more in later years. If the Blueprint were fully funded, we would instead have substantial general fund structural surpluses in those years.
• With long-overdue tax reforms like closing corporate tax loopholes, reforming our income tax, and asking more of those whose income comes from wealth rather than work, we can raise nearly $1 billion per year ($986 million based on updated projections, without tax credit expansions). Bolder revenue reforms could raise considerably more, even while simultaneously taking ambitious steps to reduce child poverty.