Maryland Plan For Spending Federal Aid Focuses on Construction Projects, Broadband Access, and Balancing the Books

Photo by Martin Falbisoner via Creative Commons

Budget analysis by Christopher Meyer

This week, Maryland leaders outlined their plans for using the additional $3.9 billion in direct state aid expected from the federal American Rescue Plan Act. Minimal funds are targeted to provide additional direct relief to the Marylanders struggling to make ends meet because of the coronavirus pandemic. The largest areas of investment outlined by Governor Larry Hogan, Senate President Bill Ferguson, and House Speaker Adrienne Jones include:

• Reimbursing various state funds for money already spent on pandemic response and direct relief
• Investing in expanded broadband infrastructure and access across the state
• Helping fund a slate of already planned construction projects, including upgrades to school heating and cooling systems, park improvements, hospital renovations and expansions, and public facilities
• Restoring a small number of items previously cut from the state budget

This plan reserves very little funds for continued targeted support to those Marylanders facing unprecedented challenges because of the pandemic. There is value in investing in infrastructure, and Maryland has a backlog of unmet needs that this approach can help address. And, there are billions in additional federal funds beyond this pool of funds that are targeted to help Marylanders afford housing, food, utilities, and child care.

At the same time, we urge state policymakers to keep in mind that nearly one-third of Maryland adults report having trouble affording basic household expenses. There are hundreds of thousands of Marylanders who are currently at risk of homelessness when eviction moratoriums expire, who still can’t afford enough food, and who are still unemployed. In addition, while policymakers have taken some steps to extend relief to immigrant families, many are still excluded from many federal relief programs and state aid can provide a vital lifeline to those families. It is still unclear how quickly the economy will recover, and those most severely affected may need ongoing assistance beyond the limits of current programs and funding.

Supplemental Budget Highlights

Governor Hogan introduced a fifth supplemental budget on March 31 outlining the use of $1.9 billion of expected federal funds from the American Rescue Plan, as well as federal funds remaining from prior rounds of aid. The plan had been negotiated with General Assembly leaders and was quickly incorporated into the overall state budget, which received final passage on Friday, April 2.

With just two days between the spending plan for the billions in federal funds being announced and the final passage of the budget and no public hearing required, Marylanders had virtually no opportunity to weigh in on the proposed use of funds. This runs counter to the intent of several recent pieces of legislation, and November’s constitutional amendment ballot measure, to provide greater transparency and access to state fiscal policy choices. While legislators followed the normal process for supplemental budgets, the size and scope of this addition to the state budget should have merited more transparency and tie for review.

In addition to using the funds to address a variety of needs, the budget revisions leave the state in healthy fiscal shape, with a significant amount of money in reserve funds to respond to unexpected needs.

• Pandemic Response ($682 million): The largest category of spending is, appropriately, focused on direct emergency response to the pandemic, including things like testing, vaccinations, personal protective equipment, and the workforce needed to accomplish these tasks. Some of these actions are essentially using new federal funds to replace state dollars already spent.
• Aid to county and municipal governments ($516 million): The bulk of this aid consists of federal stimulus money earmarked for municipalities but distributed by the state. Counties and some larger municipalities received this funding directly from the federal government.
• Capital projects ($432 million): For the most part, these funds are going to construction and infrastructure projects that were already in the budget. Using federal funds for these projects will potentially free up state funds for other uses.
• Expanding broadband access ($285 million): Expanding broadband access to under-served communities will have lasting benefits for families and our state’s economy. These funds will support both expansion of the physical broadband infrastructure as well as subsidized access to service for low-income households.
• Public schools ($328 million): These funds will expand tutoring programs to help students who need additional supports, as well as upgrades to school heating and cooling systems and other needs required to support safe reopening of schools. This includes $200 million from the major federal stimulus passed in 2020 (the CARES Act).
• Health ($228 million): Additional support for local health departments, which continue to have a large role in pandemic response, and increased funds for substance use treatment. This includes $118 in 2020 stimulus funding.
• Apprenticeships and employment training ($75 million): State leaders say these funds will help prepare people for opportunities in different fields if their prior industry remains severely impacted by the effects of the pandemic.
• Economic assistance to Marylanders ($74 million)
  • $8 million unemployment insurance payments to workers who had issues accessing payments in a timely manner, in part because of problems with the state’s unemployment agency
  • $46 million to continue the higher monthly benefits for people receiving Temporary Cash Assistance and Temporary Disability Assistance through the end of this year
  • $20 million for utility assistance
• Support for the state’s public service providers ($68 million): Most of these funds will be used to provide hazard pay to workers in frontline, public-facing positions. These funds also support additional compensation for public defenders and special education teachers at nonpublic schools.
• Relocating state employees from State Center ($50 million): This is part of a long-discussed initiative to replacing aging state office buildings in Baltimore.
• Telework assistance ($15 million): $10 million is to assist state workers with telework expenses and the remainder is to assist private employers.
• Natural resources/environment ($9 million)
• Reversing items that would have been cut in the new budget year starting July 1 ($2 million)

Unemployment Insurance Trust Fund

The largest investment state leaders announced this week is a plan to use $1.1 billion in federal funds to restore the state’s Unemployment Insurance Trust Fund. This was not included in the supplemental budget.

Governor Hogan said the goal of this action is to avoid increasing the taxes that employers must pay into the fund in exchange for their employees being eligible for unemployment payments if they are laid off or have their hours significantly cut.

There are two significant issues with this proposal. First, it is unclear whether the U.S. Department of Treasury will allow states to use American Rescue Plan dollars for their unemployment insurance trust funds. Treasury is still crafting detailed guidance for the use of funds.

Second, this approach uses a massive amount of funds for something that provides minimal benefit to most Marylanders. If the state wants to help businesses that have been severely harmed by the pandemic, it would be more effective to provide direct payments to the most impacted businesses. Another option that would be more in line with federal goals for these funds would be to provide additional unemployment benefits, which would also support local businesses as they benefit from customers having money to spend.