Final Fiscal 2016 Budget Actions Adopted – Local Government Summary

The House and Senate adopted the joint budget conference committee report on the floor the final day of session, finalizing the General Assembly’s actions on the fiscal 2016 budget. The $40.5 billion budget as passed by the General Assembly, reduces general fund spending by $449 million in fiscal years 2015 and 2016, and reduces the structural deficit by approximately 69%. The growth in total State spending is 1.5%, while general fund growth  is 2.8%.

The savings identified would make it possible to restore funding for priorities identified by the General Assembly (funding for education, a cost of living adjustment (COLA) for State employees, and increased Medicaid rates for health care providers), but its unclear whether the Governor will allocate the funds for these purposes.

Direct Aid to Local Governments increases by 2.7%, with the greatest dollar increase in funding going to education, $137.6 million. This figure includes full funding of the Geographic Cost of Education Index (GCEI). The Governor’s proposed budget funded GCEI at 50% of full funding.  The General Assembly budget plan funds it at 100%, however full funding is at the discretion of the Governor. Local health department funding increases by $3.9 million, 9.4%; and transportation funding increases by $8.6 million, 4.5%. Funds allocated to counties and municipalities increase by $6.8 million, 2.8%.

Final General Assembly Budget Plan actions affecting local governments are shown below.

EDUCATION – The General Assembly budget plan restores almost $138 million in education funding by rejecting the Governor’s proposal to freeze the per pupil funding in the education formula and full funding GCEI. As explained above, full funding of GCEI is at the Governor’s discretion. The plan also rejects the Governor’s proposal to freeze out year growth from fiscal year 17 – 20. As proposed in the Governor’s budget, the phase-in of a wealth measure used in the funding formula (net taxable income) will be extended by one year.

Community Colleges – The General Assembly budget plan restores $4 million in funding and applies a hold harmless grant to ensure no community college receives less than the prior year.

Libraries – As proposed in the Governor’s budget, the phase-in of the increase in the per-resident amount in the library formula is being extended from 5 to 10 years.

Transportation – As provided for in supplemental budget No. 1, the General Assembly budget plan includes an additional $25 million for local transportation funding – $4 million counties; $19 million municipalities; and $2 million Baltimore City.

Local Health Departments – The General Assembly budget plan restores $3.9 million for local health departments, bringing fiscal 2016 funding to $45.6 million. The Governor’s budget proposed funding local health departments at the fiscal 2014 level, $41.7 million.

Police Aid – As proposed in the Governor’s budget, Police Aid is being funded at the fiscal 2014 level of $67.3 million. The General Assembly rejected a Department of Legislative Services to further reduce the program by $25 million.

Disparity Grant – The General Assembly budget plan fully funds the disparity grant at $129.8 million, instead of the fiscal 2014 level as proposed in the Governor’s budget. The Department of Legislative Services has suggested that a workgroup be convened over the 2015 interim to further study and make recommendations concerning the Disparity Grant program and how the formulas and allocations shall be determined in the future.

Program Open Space – The General Assembly budget plan transfers $12.8 million in Program Open Space funds and $10.5 million in unencumbered fund balance to the General Fund. The $10.5 million is being replaced by bonds in the capital budget. The plan also delays a $50 million dollar statutory repayment to fiscal 2019.

Park Lands – Payment in Lieu of Taxes – The General Assembly budget plan restores $2.5 million in fiscal 2016. This restoration was made contingent upon legislation to create on open space incentive program, SB 134, not passing.

Video Lottery Terminal Local Impact Grants – The General Assembly budget plan maintains funds for local impact grants, rejecting the Governor’s proposal to retain funds in the Education Trust Fund – $4.1 million in fiscal 2015 and $3.9 million in fiscal 2016.

Local Income Tax Reserve Fund – The General Assembly budget plan adopts the transfer of $100 million to the general fund, but pays it back $10 million a year over 10 years, instead of a full payback in fiscal 2016.

Freeze on Mandatory Spending – The General Assembly budget plan rejects language that would have permanently capped growth in statutorily mandated funding formulas.

SDAT State and Local  Advisory Council – The General Assembly has adopted committee narrative as part of the fiscal 2016 budget to direct the State Department of Assessments and Taxation (SDAT) to establish a State and Local Advisory Council to discuss issues of mutual interest with local governments and provide guidance on the implementation of recommendations from the 2014 Assessment Workgroup (AWG). The language also directs SDAT to introduce legislation during the 2016 session of the General Assembly that responds to the recommendations from the AWG report.

Wynne Case -The General Assembly budget plan includes language that would address issues resulting from a case that was recently argued before the U.S Supreme Court, Maryland State Comptroller of the Treasury v. Brian Wynne. Should the lower court ruling be upheld, local governments would be required to provide a credit against the local income tax for income earned out-of-state. Language included in HB 72, The Budget Reconciliation and Financing Act of 2015 (BRFA) would specify how the credit against the local income tax would be applied and how the refunds would be paid contingent on the outcome of the case.