First Look at the Governor’s Budget

For the first time in years, the governor’s proposed state spending plan for the next budget year includes no major cuts, funds raises for state employees and contractors, and supports new investments in key priorities like increasing access to affordable child care and building or renovating schools. However, it still leaves state lawmakers with some significant choices as the General Assembly takes up its task of working through the budget.

Three things to keep in mind about the governor’s proposal:

1. The governor doesn’t propose any new investments in education to begin implementing the recommendations of the Commission on Innovation and Excellence in Education (the “Kirwan Commission”). Last year, the General Assembly set aside $200 million to begin implementing the recommendations, which are designed to make all MD schools competitive in the global economy, and the commission has recommended $325 in additional funding for next school year.
2. The budget does not meet the legislative recommendation that it be “structurally balanced” – that is, it spends about $62 million more than the state is expected to receive in revenues in the next budget year, which runs from July 1, 2019 to June 30, 2020. The discrepancy is due to some line items that the governor’s budget considers one-time spending but nonpartisan state analysts say should count as an ongoing expense. Legislators will need to decide whether to cut $62 million from other areas of the budget to address this.
3. The state’s long-term fiscal health is uncertain. When new revenue estimates come out in March, we will see the full fiscal impact of the month-long federal government shutdown, expected to cost Maryland millions in sales taxes. Policymakers may have to scramble to cut the budget based on the new estimates. In addition, some economists are projecting there could be a recession or economic downturn as soon as next year, which could cause state revenues in future years to decline and increase demands on public services that are already stretched thin.

What’s In the Budget

• New tax breaks. The governor is proposing doubling down on business tax breaks that have proven ineffective as well as creating additional tax loopholes, with a total cost of $35 million this year and $138 million per year once fully phased in. With significant need for state investment in education and other foundations of thriving communities and the possibility of an economic downturn, Maryland can’t afford new tax giveaways.
• Additional funding for child care. Thanks to a budget deal struck last year in Congress, the state expects to receive a large increase in federal funding for child care subsidies. This will allow the state to make higher quality care available to more families, opening up economic opportunities for more working parents. While these improvements are welcome, Maryland’s child care subsidy rates will likely still be far below federal standards as of February 2018, making it harder for families to access high-quality care.
• Increased support for homebuyers. The budget significantly increases the state’s investment in housing and community development. The department’s combined operating and capital budgets increase by about $30 million. The largest increase goes to homeownership programs that offer low-interest mortgages to low- and middle-income homebuyers. At the same time, this housing budget anticipates no meaningful increase in federal housing assistance payments, and does not supplement that investment with state funds—which means that thousands of families will continue struggling to keep a roof over their heads with no help at all.
• New community college scholarships. The budget includes $15 million in new funding for Promise scholarships, which will allow students to attend community college tuition-free. This new investment is mandated under legislation enacted last year.
• Increases in assistance for low-income families and individuals with disabilities. The budget includes much-needed increases in the monthly benefit amount for the very low-income families who receive Temporary Cash Assistance and individuals who receive Temporary Disability Assistance while working through the federal disability process. Both increases are mandated by legislative actions.
• Rate increases for service providers. The budget increases the rates that the state pays to contractors who provide a range of services for people with disabilities, addiction treatment, foster care, child care for low-income parents, and more. While most of these increases are mandated by legislative actions in the last few years, some of Gov. Hogan’s budgets during his first term attempted to keep rates flat or increase rates by less than required.
• Higher salaries for corrections officers. While the number of people in the state corrections system is at its lowest level since 1991, the proposed public safety budget is 3 percent higher than the current budget year. That’s largely due to a $13 million investment in raising salaries for corrections officers, in an attempt to address the significant staffing shortages at state prisons.
• Greater investments in transportation. The budget makes good on the state’s promise to invest in the Metro transit system in the Washington, D.C. region. This investment is part of a multi-jurisdiction effort to improve Metro’s safety and reliability, as required by legislation passed last year. Local governments will also see a significant increase in funds for local transportation projects, with more than three times the amount of funding that was available in this year’s budget.

What’s Missing

• New funding to improve public schools. The budget includes little new funding for the bold reforms the Kirwan Commission has recommended. The governor has instead chosen to leave inflation-adjusted state school funding per pupil almost exactly where it was five years ago, when only six of Maryland’s 24 school districts were funded at or near state standards.
• Funding for environmental programs. Funding for environmental programs decreases by 7 percent at a critical time when environmental regulations and funding are under attack at the federal level. While core Chesapeake Bay restoration programs are fully funded, the Governor’s budget cuts funding for local water quality, wastewater treatment, and agricultural runoff management projects by more than $150 million, even as bay jurisdictions continue to fall short of goals for nitrogen reduction.
• Sufficient employment services for people with disabilities. The Division of Rehabilitation Services, which provides employment-related services to Marylanders with disabilities, continues to be stretched thin. Because of insufficient state and federal funding, the division has 2,700 people sitting on a waiting list rather than receiving the services that could help them get back to work. Federal funding for the division declined slightly this year, and the division has 17 fewer staff to serve workers with disabilities than it did in 2015.