The FY15 Budget for Local Governments – What’s Really Happening?

Amidst the voluminous publications and summaries of budget information, MACo has isolated funding targeted to local governments themselves, and offers this summary of each program.  The Governor’s proposed FY 2015 budget includes a modest 1.4% increase in funding direct to local governments, with most areas of increase simply following statutory formulas.  Other reports have focused on a total increase of $183 million (or 2.6%) in “Aid to Local Governments” which (as always) includes funds directed to boards of education, libraries, and community colleges.

Data used in this analysis is from two documents from the Department of Budget and Management:
FY 2015 Budget Highlights
FY2014 Budget Highlights

The key local government funding areas are summarized below:

Funding increases by 3.4m, or 3%

Explanation:  Most of this funding is through the police aid formula (unchanged) accompanied by certain special grants that are largely the same as last year.

Funding increases by 2.8m, or 1.5%

Explanation:  Most of this funding is through the remnants of the Highway User Revenue formula, which is sadly unchanged from statute.  HUR funding used to be the backbone of local government road and bridge funding, but state budget cuts have reduced most counties’ funding to less than 10% of previous levels.  The modest growth here is from a small increase in total revenues from vehicle and motor fuel sales.

Elsewhere, a “one time” municipal-only transportation grant in FY 14 has been included in the proposed budget, at $16m (a 5% increase from its $15.3m level last year).  No comparable support for county-maintained roads of bridges was provided.

Funding increases by 6.9m, or 17%

Explanation:  Most state funding of local health departments is through a core funding formula, which during recent years had been cut back to nearly half of prior funding levels.  The increase in the proposed budget exceeds the required formula allowance, but details are not yet available on the components of the funding increase.  Health officers and county governments have raised deep concerns that the formula inherently underfunds personnel costs for department staff, most of whom are technically state employees and subject to the state pay scale — but state-enacted COLAs and steps are not reflected in the formula funding.

Funding increases by 14.6m, or 12%

Explanation: Disparity grants are statutory funding provided to targeted counties to offset their unusually low yield from the income tax. Legislation during the 2013 session altered the grant formula, and corrected anomalies that left certain jurisdictions excluded or underfunded relative to their updated wealth calculations.  Those statutory changes drive the funding increase, the budget and BRFA do not amend or enhance the funding formula for FY 15.

Funding decreases by 25.3m, or 45%

Explanation: A major cost-cutting measure in the FY budget plan is to redirect virtually all “free” transfer tax revenues (about $69 million not previously encumbered) to the general fund.  The effect of this shift on the local side of Program Open Space (one of numerous programs historically supported through the state transfer tax) is a complete elimination of any new funding in FY15.  However, the FY15 allocation is planned to be paid back over the next three fiscal years (FYs 16-18) via GO bonds.   The plan from last year still remains in place from FYs 16-20 where half of the appropriation is to be transfer tax cash and the other half in GO bonds over the subsequent two fiscal years, with the plan to be all transfer tax cash funded by FY19.

Funding increases by 7.3m, or 22%

Explanation: The increase arises from increased traffic and revenue at the host venues, where the “impact aid” is a share of the state revenue arising from handle at video lottery terminals. The budget plan does not alter any formulas, only flows through the additional funds due to higher traffic both at the casinos, but on the local infrastructure.


The reports indicate a variety of other aid (roughly $40m total, decreasing slightly in the FY 15 budget), collectively aggregated without further detail.  MACo will report further on any anomalous distributions from within this section, but no changes in statutory formulas appear in the BRFA legislation (where any permanent changes or statute overrides would need to be effected).

Michael Sanderson

Executive Director Maryland Association of Counties