Principles for a State Budget That Advances Opportunity For Everyone

Research Analyst Christopher Meyer contributed to this post

As Maryland policymakers begin the annual state budget process, they have a chance to make transformative investments that benefit Maryland families and communities for years to come and advance opportunity for all Marylanders, whether urban or rural, white, Black, or Brown.

The success of federal pandemic relief programs has left the state in the strongest fiscal position it has been in many years, allowing policymakers to continue responding to the needs of Maryland families still facing challenges due to the pandemic and address the needs of communities that have historically been left out of public investments.

The state closed its 2020–2021 budget year with an unprecedented $2.5 billion surplus, not including additional funds reserved for use in the 2022 budget year. Analysts project structural surpluses – a measure of the state’s fiscal fundamentals that excludes one-time revenues and costs – averaging $1.9 billion per year through budget year 2028.

Here are priorities we will be looking for as Governor Larry Hogan presents his proposed budget to the General Assembly this week.

Increase Economic Security For Families

While most federal relief programs have ended or are phasing out, the current surge in COVID-19 cases across the state due to the omicron variant is a reminder that many Marylanders continue to face the loss of work hours (110,000 Marylanders on average during fall 2021) or barriers to returning to work related to the pandemic, such as the need to care for children (100,000 Marylanders) or health concerns (130,000 Marylanders).

As the success of the federal relief programs has shown, we all benefit when families can at least afford to keep a roof over their heads, food on the table, and buy basics like school supplies and clothes.

Policymakers could use available funds to:

• Continue emergency rental assistance programs to prevent evictions
• Reinstate unemployment payments to people who lost assistance when expanded federal benefits ended in September
• Increase staffing at the Division of Unemployment Insurance, which has struggled to process and pay claims promptly because of deep personnel cuts in the years before the pandemic
• Extend current higher benefit amounts for family income support programs, such as Temporary Cash Assistance and Supplemental Nutrition Assistance Program (SNAP)
• Provide additional one-time cash payments to low-income households, as the state did last year with the RELIEF Act

Invest in Projects That Will Benefit Communities for Years to Come

Budgeting best practices generally recommend using one-time funds – money that the state does not expect to receive in future years – for one-time expenses, rather than ongoing ones. The available state funds along with the funds coming to Maryland through the federal Infrastructure Investment and Jobs Act makes this moment a great opportunity to advance public construction projects such as expanding transit service, upgrading outdated school buildings, improving sidewalks and bike routes, and many other community resources.

Many public facilities across the state are far behind ideal repair and replacement schedules because of budget constraints in the decade following the Great Recession and the Hogan administration’s continued refusal to increase state borrowing for construction projects to the highest fiscally responsible levels. Investments in construction projects have the added economic benefit of supporting good-paying jobs.

Policymakers can advance racial and economic justice by prioritizing the needs of communities that have historically seen less public investment and are therefore more likely to have older school buildings, inadequate transportation networks, and few public amenities like parks, libraries, and community centers.

Strengthen, Not Weaken Revenues

For an inclusive economy that delivers for everyone over the long term, Maryland policymakers should strengthen revenues and make our tax system more equitable, not weaken revenues through misguided new tax breaks.

There is abundant evidence from the last decade to show that big tax breaks, particularly cuts to personal and corporate income taxes, ultimately harm the public services people rely on, including schools, health care, and transportation, and that they don’t boost the economy.

Most of Governor Hogan’s proposed tax breaks will have long-lasting costs that go far beyond the currently available funds and would disproportionately benefit higher-income Marylanders. Policymakers should reject most of his proposals.

The one exception is his proposal to make permanent the 2021 expansions to the state’s Earned Income Tax Credit, which increased the value of the credit and allowed all immigrant taxpayers to receive the credit for the first time. Because it is targeted to low- and moderate-income families, the EITC has a long track record of reducing poverty – and the health and other effects that often go hand-in hand with poverty. While putting people on a path to longer-term economic stability, it is also linked to increased spending at local businesses.

Instead of advancing tax breaks that will benefit those who are already thriving, policymakers should use this opportunity to make our tax system more equitable and provide revenue to support community needs over the long term. To start, policymakers should finally pass the Corporate Tax Fairness Act and close the loopholes that allow large, multi-state corporations to avoid Maryland taxes and get another leg up over local, Maryland-based small businesses. The majority of other states have already closed these loopholes and it’s far past time for Maryland to do the same.

Address Longstanding Barriers to Opportunity

The choices Maryland policymakers make about how to use our shared resources can help or hinder children’s education, economic security for families and communities, and public health and safety. MDCEP’s analysis through the Budgeting For Opportunity series has highlighted areas of the state budget where different choices could help advance racial, ethnic, gender, and economic justice. This year offers a great opportunity to make progress in these areas.

For example:

• Invest in community health. The COVID-19 pandemic has demonstrated how essential a healthy population is for a healthy labor market. We should use state funds to ensure every Marylander has health insurance, beginning with Marylanders born outside the United States, who in many cases are excluded from Medicaid and other federal health care programs. We should also rebuild support for local health departments, which have been hollowed out over the last 30 years, and pay competitive rates to the providers who care for clients who have health coverage through Medicaid.
• Support people caring for children. The state should conduct outreach to maximize public awareness of childcare assistance, increase child care provider rates to the full 75th percentile federal standard, and if necessary use state funds to prevent future wait lists or eligibility restrictions. The state should also establish a payroll-supported social insurance fund to guarantee all workers access to paid family and medical leave.
• Protect workers by strengthening state enforcement agencies. The state should provide increased funding and staffing to the Maryland Commission on Civil Rights, Employment Standards Service, and Maryland Occupational Safety and Health Administration. Sufficient staffing will enable these agencies to investigate and resolve complaints quickly and reliably.
• End use of fines and fees. Policies like criminal legal system fines and fees and driver’s license revocation as punishments effectively criminalize poverty, and the state should stop relying on them. In addition, the state should remove onerous fines and fees charged to incarcerated people and ensure there is effective addiction treatment, mental health care, and other services to help prepare incarcerated people for a more successful return to their communities.