Disparity Grant to Drop Significantly

Due to shifting distributions of personal income across counties, several jurisdictions will see a considerable decline in their Disparity Grant for FY 2011.  In short, with the FY 2011 Disparity Grant now being based off a tax year with far less investment income and capital gains than in the prior year, the statewide average income has “fallen back” to a lower point, making the amount of calculated disparity lesser for most of the eligible jurisdictions — even those who themselves have suffered loss in income tax base. The total of grants to all eligible counties drops from $121 million in FY 2010 to $97 million in FY 2011, with the largest drop in funding in Prince George’s County, facing a dramatic decline from $21 million to only $3 million.

The Disparity Grant addresses the differences in the ability of a local jurisdiction to raise revenues from the local income tax.  Counties with per capita local income tax revenues less than 75% of the statewide average receive a grant equal to the dollar amount necessary to raise the county’s per capita income tax revenues to 75% of the statewide average. The distributions are, by statute, recalculated each year with the most recently available data, generating year-to-year variations in the resulting distributions. In 2009, the General Assembly (as part of the broad Budget Reconciliation and Financing Act) capped the annual amount each county could receive from the Disparity Grant in future years at its FY 2010 levels.

According to a document provided by the Department of Budget and Management, tax revenues, on a statewide basis, decreased by an average of 5% in FY 2011 from the prior year.  Whereas, tax revenues in Allegany and Prince George’s Counties declined by -1.7% and -0.6%, respectively, significantly less that the statewide average.  Tax revenues in Baltimore City declined at a slightly greater rate than the statewide average, 5.1%.   These declines, as well as shifts in population, result in these three jurisdictions receiving significantly less in Disparity Grant funding in FY 2011.  Garrett and Somerset counties will also see a slight decline.

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