When Is Local Aid Not Really Local Aid?

Every summary of state spending patterns presents an opportunity to assess and analyze the underlying priorities. Generally, one category of spending is lumped together as “Aid to Local Governments,” or something similar. While a convenient and economical use of space for presentation purposes, this nearly universal label can leave a sorely mistaken impression.

So, when is local aid not really local aid? Here’s the short answer: when it’s nearly all funding education, the state’s constitutional responsibility, and the local governments are merely pass-throughs.

Recently, the state’s Spending Affordability Committee met to begin its autumnal work of evaluating economic and spending trends, aiming toward its annual recommendations (which have usually been taken very seriously by the General Assembly in finalizing its budget plans). Its first overview briefing, about 30 pages long from October 16, gives a concise and widely-followed snapshot into the state’s fiscal posture.

One assessment from this report came from the Greater Baltimore Committee’s Donald Fry, writing earlier this week for the online site Center Maryland. In his column, he assesses the causes for the state’s re-emerging structural deficit, and observes:

— The state has, over the years, set itself up as a funding source and central distributor of operating funding to local governments. Aid to local governments currently accounts for more than 25 percent of the state’s total operating expenditures, according to the spending affordability briefing.

The table presumably fueling that summary is on page 14 of the Spending Affordability Committee’s overview — online here. From that report we see the totals in keeping with the 25% figure… baseline FY 2015 spending expected at about $7.1 billion, from a total of about $27 billion in operating expenditures.

The further detail in the same report, however, tells a more complicated and revealing story than just the “Aid to Local Governments” heading. Specifically:

Education, Education, Education. Of the $7.1 billion in “Aid” about 90% of the funding is for education. Primary and Secondary schools are slated to receive about $6.2 billion in formula and other funding, and community colleges another $300 million. The mandate to deliver the state’s public education system is a fundamental requirement of the State of Maryland, enshrined in the state constitution.

Local Governments Themselves Are Secondary Players. The share of this “Aid to Local Governments” that actually is directed to local governments per se is a much less overwhelming figure – roughly $560 million, or a mere 2% or so of the state’s total operating expenditures. Support for county and municipal government is not the driver for growth in state spending – in fact quite the reverse. The corresponding amount of state spending to actual local governments was about $940 million as recently as five years ago, and has been cut by nearly half since then.  (And that doesn’t account for massive cost shifts to county governments on top of these cutbacks in aid)

To be clear, there’s nothing at all sinister or secret about the state making a major commitment to children and our schools.  Many leaders in Annapolis will gladly run on this record in the coming election.  It’s the label of “Aid to Local Governments” that leaves readers and taxpayers perplexed about these priorities.  And getting past that label, and realizing this is really education funding, makes that decision a bit less out-of-place when labeled as one of the “major built-in fiscal challenges” facing the State.

Michael Sanderson

Executive Director Maryland Association of Counties
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