Proposed FY 2015 Budget: $41 Billion

What’s In It for You, Your Family, and Your Community?

Earlier this month, Governor O’Malley introduced the state’s $43 billion Fiscal Year (FY) 2015 budget, the last state fiscal plan of his administration. The FY 2015 budget includes $39.2 billion in the Operating Budget and $1.5 Billion in the Capital Budget.

Nearly two- thirds (64 percent) of the Operating Budget goes to Education and Health; and about three- quarters (73 percent) of the Operating Budget is paid for with State funds, including the General Fund, which receives collections from many ongoing state tax sources, and Special/Higher Education Funds. Capital funding includes $2.6 billion for Transportation Capital projects, which are funded in the Operating Budget, and $1.5 billion for General Capital projects.

The proposed budget aligns with the Spending Affordability Committee recommendations and projects that the structural budget deficit will be eliminated by FY 2017. The budget closes a current General Fund gap of $584 million and leaves a $30 million FY 2015 fund balance, in part through $457 million in reductions, including $336 million in savings in Employee Health and Retirement costs, and $163 million in transfers and payments, including an additional $69 million from the Transfer Tax.

While the structural gap in the Operating Budget may be closed by FY 2017, there are other threats to Maryland’s finances. 11 percent of that year’s Capital Debt will be pre-authorized for Operating Budget relief, slightly below the share in this year’s budget. The projected Rainy Day Fund balance of $800 million at the end of FY 2015 is barely at 5 percent of General Fund revenues, the level recommended by bond rating agencies and one factor in retaining the state’s AAA bond rating. Other short-term and long-term risks in the administration plan include the potential for insufficient fund balances to pay for unexpected deficiencies, at least $132 million in increased General Fund spending in the next budget due to assumptions and transfers in this budget, and future growth in debt service costs.

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