Fiscal Briefing: Budget Outlook & Local Aid Loss

On Monday, the Department of Legislative Services (DLS) delivered its annual fiscal briefing to the General Assembly budget committees. Occurring right off the heels of the federal government shutdown, the tone was markedly different from the Governor’s budget proposal announcement.

Local Aid 

clipart-thumbs-down-25The Governor is proposing to balance his budget in part by shifting costs for the State Department of Assessments and Taxation (SDAT) to the counties, costing them a total of $19.7 million, and cutting county aid by an additional $23.5 million. While his proposal adds $15 million in county transportation grants over last year’s approved budget, and $15.2 in Hold Harmless Education Grants to specific counties, net local aid impact is a loss of $9.2 million.

DLS provides a county-by-county breakdown of effects of the SDAT cost shift here.

Following a line of questioning by Speaker Busch, DLS analysts reported that the Governor is seeking to defer repayments for Program Open Space, funding only $6 million for the program. The Governor has previously championed his support for repaying funds shifted away from the program.

No bond capacity is reserved in the capital budget for local initiatives.

The local aid section is available here. Transportation aid increases by $18 million, or 8.2 percent; public safety increases by $700,000, or 0.5 percent; disparity grant aid increases by $2 million, or 1.4 percent; and local health grants are decreased by $600,000, or by 1.2 percent.

Structural Deficit

The Spending Affordability Committee (SAC) set a goal of eliminating the structural deficit forecast for fiscal 2019. The Governor’s proposed budget, according to DLS, leaves a structural deficit of $75.0 million in the upcoming fiscal year, which grows to over $1 billion in fiscal 2022.

The Administration, when claiming that it had alleviated the structural deficit, had excluded from its analysis ongoing facilities renewal funding for the University System of Maryland ($44 million) and statutorily required spending for declining enrollment grants and prekindergarten grants ($34 million).

DLS provided a strong visual of the severity of the structural deficit issue with a bar chart showing how education aid, debt service and entitlements essentially cost enough to spend nearly all general fund revenues.

The Sunny Day Fund includes $10 million for Amazon – the first piece of the Governor’s incentive package to woo the monolith to Montgomery County.

While the Governor has offered state employees a COLA in the upcoming fiscal year, he has frozen salary increments – saving the State $63 million. The Governor also proposes avoiding a mandated supplemental pension contribution of $50 million, and reducing support for K-12 grants by $19 million.

The legislative “to do” list is available here.

The briefing can be viewed here.

 

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