What’s Funded and What’s Not as Maryland Budget Decisions Near Final Stages

Maryland lawmakers are getting close to adopting a spending plan for the next budget year, which begins July 1. The development of the state budget year has been marked by several major differences from recent years. First, as it is the first year of Gov. Wes Moore’s term, development of the proposed budget was split between his administration and the prior administration of former Gov. Larry Hogan. Second, this is the first year that the legislature has had additional powers to move money around in the budget and increase funding for certain line items, following a voter-passed constitutional amendment that passed in 2020.

And, the governor and legislature also went into the start of the budget process in a historically strong financial position, having ended the 2022 budget year with more than $1 billion in unallocated funds due in large part to the influx of federal funds early in the pandemic to prevent a serious economic downturn. However, with those federal funds having largely run their course, expectations for future growth in state revenues has been tempered. Earlier this month, state fiscal forecasters said they now expect the state to receive about $400 million less in revenue in the next budget year than they had previously forecast.

With this slight reduction in revenue and a desire to fund their own priorities, the House of Delegates and Senate have proposed some significant changes to Gov. Moore’s proposed budget. Below, we outline where funding for some key priorities stands as the legislature prepares for final negotiations and approval of the budget in the coming weeks. This summary reflects the versions of the budget that passed the House of Delegates and that passed out of the Senate Budget and Taxation Committee. The full Senate is expected to approve their version of the budget this week, and then the two chambers will use a conference committee to resolve differences before passing the final budget.

Education

Upholding the state’s commitment to the Blueprint for Maryland’s Future , education policy and funding overhaul passed in 2021, clearly remains a top priority for both Gov. Moore and the state legislature. There have been several major shifts in education funding:

• The budget expects a significant increase in education funding for the next school year, reflecting both the goals of the Blueprint and the state’s improved process for identifying the number of students growing up in poverty. The state education funding formula provides additional support for educating students from low-income families and for schools with high concentrations of students experiencing poverty.
• The budget also sets aside significant funds for implementing future years of the Blueprint.
  • Moore’s proposed budget put $500 million of the funds left over from fiscal year 2022 to put into the Blueprint Fund to help ensure the state can keep its promise to students in future years.
  • The House of Delegates proposes putting an additional $400 million in the Blueprint Fund, for a total of $900 million.
  • The Senate version of the budget proposes an additional $300 million for the Blueprint Fund, for a total of $800 million.

One other difference between the various versions of the budget is funding for the BOOST program, which provides publicly funded scholarships to some students attending private and religious schools. Gov. Moore proposed limiting funding and winding down the program by not bringing new students into the program, and the House concurred with this approach. However, the Senate committee version of the budget does restore funding for BOOST to the historical $10 million per year level.

Supporting Working Families

Gov. Moore has made ending childhood poverty one of his top policy goals and included funding in his budget to support several major pieces of legislation to help make progress toward that goal:

• Speeding up the $15 minimum wage: Moore proposed legislation that would bring the state’s minimum wage to $15 per hour in October of this year and tie future increases to inflation. His proposed budget included funds to cover the costs to the state, particularly increased funding for service providers who serve Medicaid patients so that they can increase their employees’ wages.
  • However, the amended version of the bill moving through the legislature pushes back the increase to January 2024 and removes indexing. The House and Senate versions of the budget assume that the $15 minimum wage begins January 2024 and reduce funding in the budget accordingly.
• Implementing paid family and medical leave: In 2022, the legislature passed the Time to Care Act, which will establish a public insurance program to provide paid family and medical leave to nearly all Maryland workers. Follow-up legislation under consideration this year addresses a number of changes needed to implement the bill, including pushing back the timeline to give the state Department of Labor more time to set up the new program.
  • Currently no version of the budget includes the additional funding the Department of Labor needs to begin setting up the program. Funds allocated now could ultimately be reimbursed from the employee and employer contributions to the paid family and medical leave fund. The department does need state general funds in the meantime to hire staff and have some funds to begin setting up IT systems, developing regulations, and taking steps to educate businesses and the public about the new program before collections begin next year.
  • The Senate version of the budget does include $500,000 for additional staff at the Department of Labor. Additional funding for paid leave implementation could potentially come through a supplemental budget from the Moore administration and be added to the final budget bill in the conference committee.
• Strengthening Maryland’s working family tax credits: Moore’s Family Prosperity Act would permanently adopt a temporary expansion of the state’s Earned Income Tax Credit that the legislature passed in 2021 and would otherwise expire this year, and make permanent and slightly expand the state’s Child Tax Credit. All versions of the budget currently fund this proposal, which would be an important first step toward a more equitable tax system.
• Strengthening safety net programs:
  • Moore’s proposed budget maintained the extra $45 per month in cash assistance for Marylanders receiving Temporary Cash Assistance (TCA) or Temporary Disability Assistance that began during the pandemic. The legislative versions of the budget maintain this.
  • The Senate version of the budget also requires the state agency administering TCA to end the practice of reducing a family’s benefits by $60 per month if they receive a housing study.
  • A supplemental budget Gov. Moore introduced creates a state fund to restore benefits that were stolen due to the recent national rise in “skimming” theft cases. The Senate version of the budget includes more than $11 million for this fund.

Housing

Federal emergency rental assistance funds from the 2021 American Rescue Plan Act have kept thousands of Marylanders in their homes over the last couple of years. However, those funds are running out, leaving many at risk of eviction as families continue to try to get back on their feet after losing jobs or facing other financial challenges during the pandemic while also dealing with higher rents and higher costs for everyday necessities. Housing advocates had asked for $175 million in state funds to continue offering emergency rental assistance. Currently no version of the budget includes any additional funds for emergency rental assistance.

Public Safety

• One of the major policies the legislature is working on this session is setting up the structure for Maryland’s expanding cannabis market. Adult recreational use of cannabis will become legal July 1. There will likely be additional revenues from licensing new retailers and taxing the sale of cannabis, along with additional expenses for regulation and licensing infrastructure. This is outlined in legislation but not currently incorporated into the budget.
  • The House and Senate budgets also add a $40 million cannabis business assistance fund.
• The budget currently does not include needed funding for planning construction of a women’s pre-release facility. Maryland does not have a stand-alone facility to provide pre-release services for women preparing to return their communities following incarceration. Legislation in 2021 required the construction of such a facility but progress has continued to stall due to lack of funding in the budget in some years and the Department of Corrections failing to use available funds to take the next steps on the project.

Other Changes

The House and Senate versions of the budget cuts more than $800 million in proposed general fund spending from the governor’s budget both to account for the lower revenue estimates that came out this month and to make room in the budget for some of the legislature’s priorities. Under the new balance of power outlined in the 2020 constitutional amendment, the governor now has line item veto authority to reject the legislature’s changes, and then the legislature would have the opportunity to override those vetoes.

The House budget:

• Removes $500 million set aside for future transportation projects
• Assumes a greater percentage of state positions will remain vacant. State agencies are significantly under-staffed with an average vacancy rate of nearly 14% in January, which is harming those agencies’ ability to serve Marylanders needs. Gov. Moore’s budget committed to cutting vacancy rates to an average of 7.2%; the House budget reduces spending on employee pay by assuming average vacancy rates to be 8.7%.
  • All versions of the budget do include significant funding to improve pay and benefits for state employees to assist in recruitment and retention
• Puts slightly less in the Rainy Day Fund ($61 million). The Rainy Day Fund is still funded at historically high levels due to surpluses in the last couple of budget years.
• Reduces funding for Medicaid due to anticipating lower enrollment.
• Does not add $40 million in one-time funds to strengthen the state’s pension fund.

The Senate version of the budget adopts those changes plus makes a few other smaller reductions. In addition to the items mention in prior sections, both versions of the budget use a significant amount of one-time funds to pay for school construction, transportation projects, and other items that are often financed through bonds.

The Senate budget also includes a significantly longer list of small allocations of less than $1 million each to specific state agency projects and staffing, educational and cultural institutions, and community-serving nonprofits.