Governor Hogan Presents FY 2023 Budget Focused on Major Tax Relief

• Rainy Day Fund Increased to Record $3.6 Billion
• Major Tax Relief for Maryland Retirees and Working Families
• Record $8.15 Billion For K-12 Education; Record $1 Billion For School Construction Projects
• Additional Relief For Underserved Marylanders; Expansion of SNAP For Seniors and Children
• Maryland Park Service Funding at 20-Year High; Fully Funding Chesapeake Bay Restoration Efforts for Seventh Consecutive Year
• Largest-Ever Capital Budget in Maryland History; Funds All Mandates and Legislative Preauthorizations

ANNAPOLIS, MD—Governor Larry Hogan today presented his Fiscal Year 2023 (FY 2023) surplus budget, which strengthens the state’s Rainy Day Fund to record levels, delivers major tax relief to retirees and working families, expands relief for vulnerable Marylanders, makes a record investment in K-12 education and school construction, increases funding for the Maryland Park Service, fully funds Chesapeake Bay restoration, and provides record funding for addressing mental health and substance use disorders.

“The entire mission of our administration has been to leave our state in a stronger fiscal position than when we found it,” said Governor Hogan. “Today, after seven years of hard work and holding the line, the State of Maryland is projecting a long-term structurally balanced budget for the first time in nearly a quarter-century. Rather than leaving a structural deficit, we will leave a long-term budget surplus.”

The FY 2023 budget is available at http://dbm.maryland.gov.

Five-Point Surplus Framework

After inheriting a $5.1 billion structural deficit, the governor’s eighth and final budget provides for a $1.3 billion structural surplus. The budget delivers on the five-point framework for the surplus that the governor announced last fall:

Strengthening The Rainy Day Fund. The budget commits an additional $2.4 billion to the Rainy Day Fund, bringing the balance to a record $3.6 billion. This level represents 15.9% of revenues, well above the 9% recommended by the General Assembly’s Spending Affordability Committee. The budget maintains a balance in the Rainy Day Fund of more than $3 billion each year.

Tax Relief For Maryland Retirees. The governor has proposed a plan to gradually eliminate the taxation of all income of retirees receiving Social Security who are above the age of 65. The proposal would remove 70,000 low-income seniors from the state’s tax rolls in the first year alone—tax year 2022.

Tax Relief For Working Marylanders. The governor has proposed broad-based tax relief for hardworking Marylanders by permanently expanding the enhanced State Refundable Earned Income Tax Credit, which would benefit nearly 300,000 Maryland families.

Additional Relief For Vulnerable Marylanders. The governor’s budget expands and enhances benefits for underserved Marylanders in a number of critical areas, including:

• Enhancements to utility and electric assistance programs, helping more than 160,000 households see their minimum benefits increase by at least 66%
• Fully funding Temporary Disability Assistance Program five years early, helping more than 11,000 individuals each month
• Enhanced Supplemental Nutrition Assistance Program (SNAP) benefits for 27,000 seniors, increasing their monthly benefit by 33%
• Expanding the summer SNAP program to support 50,000 children in low-income families

Enhancements For State Employees. The budget provides salary enhancements and bonuses for state employees, totaling more than $850 million over fiscal years 2022 and 2023.

K-12 Funding 

• The FY 2023 budget provides a record $8.15 billion for K-12 education—$151 million above the legislature’s statutory funding formulas. All told, the Hogan administration has provided $722.8 million in K-12 funding above statutory mandates.
• The FY 2023 budget provides $144.1 million to expand full-day pre-kindergarten for low-income 3- and 4-year-olds in the state. This brings the governor’s total commitment in this area to $293.4 million since FY 2020.
• The FY 2023 budget provides $50 million in FY 2022 to provide additional Child Care Stabilization Grants to support providers dealing with the impacts of the COVID-19 pandemic.
• The FY 2023 budget includes $598 million in funding to support the fourth year of the Hogan Lockbox to ensure that Video Lottery Terminal revenue supplements education funding consistent with the constitutional amendment passed by Maryland voters.
• The FY 2023 budget provides $10 million to build on the highly successful Broadening Options and Opportunities for Students Today (BOOST) program, which provides scholarships for students who are eligible for the free or reduced-price lunch program to attend eligible nonpublic schools. To date, this Hogan administration initiative has provided $51.1 million in scholarships to students in need.
• The FY 2023 budget provides $1.9 million for the Hogan administration’s P-TECH program, which creates clear pathways from high school to college and careers for students from all backgrounds.

School Construction

• The FY 2023 capital budget includes a record $1 billion for school construction projects in every jurisdiction—20% more than the previous record level. This level exceeds the approximate $700 million annual funding request from local jurisdictions, enabling jurisdictions to accelerate important projects to reduce the backlog of school facility needs.
• Under Governor Hogan’s leadership, Maryland has provided a total of $4.5 billion for school construction. FY 2023 continues the $2.2 billion Built to Learn Fund initiative with $480 million in revenue bonds. GO bonds and general funds will enhance the Public School Construction Program ($285 million), Supplemental Construction Grant Program ($95 million), and the Healthy School Facility Fund ($50 million in GO bonds, plus $40 million in federal funds). A new School Construction Revolving Loan Fund, $40 million in FY 2023, will assist jurisdictions with meeting their local matching requirements.

Higher Education

• The FY 2023 increases funding for state-operated institutions of higher education by $299.5 million, which represents a 17% increase.
• The FY 2023 budget increases support for community colleges to a record $349.4 million, a 33% increase in state support per student.
• The governor’s FY 2023 capital budget includes $601 million in higher education projects.
• The FY 2023 capital budget includes $185 million for projects at all four of Maryland’s Historically Black Colleges and Universities (HBCUs). Including FY 2023, the Hogan administration has invested a total of $675 million in these institutions to address deferred maintenance, improve infrastructure, and construct state-of-the-art instructional facilities for students and faculty.
• The FY 2023 capital budget includes $67 million for construction projects at local community colleges. Every project that is ready for funding will receive an allocation.

Capital Budget and Infrastructure

• The governor’s FY 2023 capital budget, including the capital budget for transportation, totals $6.8 billion—the largest ever for Maryland. Funding to support transportation projects, including roads and mass transit, totals $3.3 billion.
• Highlights of the transportation budget include $1.4 billion for roads and highways and $1.3 billion for mass transit improvements. Of this amount, $167 million in general funds for Washington Metropolitan Transit Authority (WMATA) improvements and $51.5 million for the Howard Street Tunnel improvements is included in the governor’s Capital Improvement Program (CIP). The funds included in the FY 2023 budget continue the state’s commitment to this initiative.

Environment, Chesapeake Bay Restoration, and Natural Resources

• For the seventh year in a row, the Hogan administration has fully funded Chesapeake Bay restoration efforts, and for the fifth year in a row, the state budget fully funds all transfer tax programs at the statutory level.
• The FY 2023 budget includes $74.7 million for the Maryland Park Service—a 20-year high. Under the Hogan administration, the park service budget has grown by 71%.
• The FY 2023 budget includes a record level of capital funding—$850 million—for environmental projects, including $313 million for protecting the Chesapeake Bay and water quality, $276 million for land preservation programs, $181 million for critical maintenance and infrastructure at Maryland’s parks and open spaces, $43 million for the Drinking Water Revolving Loan fund and water supply assistance to local governments, and $36 million for climate resiliency and flood mitigation, as well as environmental cleanup programs.
• The FY 2023 budget includes $46.6 million to fully fund the Chesapeake and Atlantic Coastal Bays Trust Fund, which supports critical bay restoration activities and implementation of best management practices.
• The FY 2023 budget includes $25.7 million for renewable and clean energy programs, and $25.5 million for energy efficiency grants.

Public Health

• The FY 2023 budget includes nearly $14.1 billion in total funds for Maryland’s Medicaid program. General fund support for Medicaid totals $4.6 billion, a $538 million increase compared to FY 2022.
• The FY 2023 budget includes more than $1.5 billion to support community services for developmentally disabled Marylanders, including an additional $30.2 million to expand services and reduce waiting lists.
• The FY 2023 budget commits more than $187 million to fund provider rate increases in the fields of behavioral health, developmental disabilities, Medicaid, and other health care services. Every budget under the Hogan administration has increased rates paid to developmental disabilities and behavioral health community service providers.
• The FY 2023 budget includes record funding for aid to local health departments, which grows to $75 million. In addition, $9.4 million is provided in FY 2022 to help local health departments overcome pandemic-related funding shortfalls.
• The FY 2023 budget includes nearly $24 million in general funds ($68.5 million total funds) to fund physician evaluation and management rates at 100% of the rate reimbursed by Medicare. Historically, this has been funded at 93% of Medicare.

Public Safety

• The FY 2023 budget fully funds the governor’s Re-Fund The Police initiative, a multi-year investment that will provide more than $500 million over three years to state and local police agencies to enhance their efforts to fight violent crime. This includes a $45 million increase in aid to local police departments, which brings total aid to a record $122.5 million.
• The FY 2023 budget includes nearly $60 million in direct local law enforcement grants, including $5 million to protect Marylanders against hate crimes—a 66% increase for this initiative.
• The FY 2023 budget includes $5.5 million for grants that support crime prevention, prosecution, witness protection, and police officer recruitment and retention under the fourth year of the governor’s Baltimore City Crime Prevention Initiative; $4.6 million for the Violence Intervention and Prevention Program; and $3.5 million to reduce the backlog of sexual assault test kits at the local level.
• The FY 2023 budget includes a record $13.3 million for Justice Reinvestment Act initiatives.

Mental Health and Substance Use Disorders

• The FY 2023 budget provides record funding—$996 million—for mental health and substance use disorder programs. Residential substance use disorder treatment spending to combat the opioid crisis facing the state has increased by 420% since FY 2017.
• The FY 2023 budget includes $293 million for substance use disorder services, and $231.2 million for mental health and substance use disorder treatment for uninsured Marylanders.
• The governor’s budget includes more than $11 million to fund the activities of the Opioid Operational Command Center, marking the sixth annual installment of funding and a total investment of more than $61 million.

Housing and Community Development

• The governor’s FY 2023 capital budget provides a record $426 million to the Maryland Department of Housing and Community Development (DHCD). Overall, through FY 2023, DHCD’s capital budget has grown by 279% during the Hogan administration.
• The DHCD capital budget includes $171 million to support improvements to statewide broadband infrastructure, $151 million for housing programs, and $104 million for community revitalization and development—including the successful Project C.O.R.E. program. Through FY 2023, the administration’s commitment to Project C.O.R.E. totals $137 million, which is 82% more than the state’s initial pledge.
• As part of the Connect Maryland initiative, the Hogan administration has committed to invest $400 million over this and future budgets for broadband-related investments focused largely on infrastructure improvements to close the digital divide.

Government Operations and Preparedness

• The FY 2023 budget includes $333.9 million in major IT funding to support 44 major projects—including the last year of development for MD THINK—and $100 million to help protect against cybersecurity incidents.
• The FY 2023 budget includes $120 million in renewal and critical maintenance of state facilities.
• The FY 2023 budget includes $100 million above actuarial estimates to support the pension system.
• The FY 2023 budget includes $70 million in additional funding to end the state’s practice of relying on bond premiums to pay for debt service.
• The FY 2023 budget includes $10 million to replenish the Catastrophic Event Account to assist communities affected by natural disasters.