Gov. Wes Moore’s (D) $70.8 billion spending plan unveiled last week closes a more than $1.5 billion deficit for fiscal 2027 but does little to ease projected future budget pain, lawmakers were told Monday.
In the first analysis of Moore’s budget, Department of Legislative Services budget analyst David Romans told members of the Senate Budget and Taxation and House Appropriations committees Monday afternoon that the proposal “makes some progress” but still leaves billions in structural gaps over the next four years.
“I think this budget is a lot less complex than last year, likely less controversial than last year, but it does accomplish the spending affordability committee goals that were set,” Romans said. “So, it does make some progress.”
The budget, the fourth of Moore’s current term, increases funding for education, housing, and police initiatives. It also closes a $1.5 billion gap without new taxes or fees. But the plan leaves multibillion-dollar shortfalls looming in out years.
“It improves the structural outlook, certainly for fiscal ’27 and ’28 as well,” Romans said. “However, it does not make substantial progress for fiscal ’28 and beyond. So, we still face very substantial and challenging shortfalls in the out years that will likely be left to the next term to try to resolve.”
In December, the Joint Spending Affordability Committee recommended limiting the structural deficit to $600 million. Moore’s proposed budget exceeded that request.
Even so, the outlook over the next four years is “pessimistic.”
In the next term, the General Assembly and governor will have to deal with a $2.3 billion shortfall. That gap widens again, this time to about $3 billion in fiscal 2029. By fiscal 2031, the gap is projected to be $4.1 billion.
In addition to the costs that will be imposed on future budgets by the Blueprint for Maryland’s Future, the state’s sweeping, decade-long education reform plan, the growing deficit will be driven in coming years by rising employee salaries and benefits, teacher retirement, and human services spending.
Not included in that outlook are potential lawsuit settlements related to the Child Victims Act, a 2023 law that lifted the 20-year statute of limitations for public and private entities accused of sexual abuse, essentially allowing victims to file suit at any time. If all the current suits that have been filed against the state under the law were settled for the maximum amount, the state could face a bill of almost $10.7 billion.
“It’s probably not something you’re going to have to deal with this session, but the Child Victims Act remains out there,” Romans said.
There are roughly 12,000 claims filed against the state, each with a potential maximum liability of $890,000. The potential liability equals almost 40% of the fiscal 2027 general fund budget.
The budget increases state aid to local governments by $370.5 million, or 3.2% over the current year. Of that, $359 million is earmarked for public education.
But not all the news is good for local governments.
Local health grants are flat-funded at $115 million.
And Moore proposed making local governments pick up 50% of the increased retirement costs for K-12 education, community colleges and libraries, an estimated $39 million tab for local governments to pick up.
Funding for local governments will be cut by about $27.2 million, driven mostly by reductions in the disparity grant. That money is sent to counties with lower-than-average per capita income tax revenues.
Prince George’s County will see a reduction of nearly $18 million. Allegany County will take a $6.3 million hit.
That cut comes as Allegany County continues to rebuild after a historic flood last spring that hit the communities of Midland, Lonaconing and Westernport particularly hard. The Federal Emergency Management Agency denied the state’s request for more than $33 million in relief aid.
Moore’s budget proposes $12 million for county infrastructure repairs related to the storm.