Disparity Grants: Disparity Between Governor & DLS Proposals

The Department of Legislative Services (DLS) is recommending that the General Assembly reduce disparity grant allocations in the Governor’s proposed budget by $2.7 million, affecting Prince George’s, Somerset and Wicomico counties.

Disparity grants are grants to low wealth jurisdictions with higher local income tax rates, intended to smooth out the effects of disparities in income tax revenue generation potential. The Governor’s proposed budget allocates $140.8 million in disparity grants, according to the formula. The Budget Analysis explains how that formula works.

For fiscal 2019, Cecil, Prince George’s, Somerset, Washington, and Wicomico counties are receiving increases from the fiscal 2018 grant, while the grant to Baltimore City declines under the formula. Unlike other counties, Cecil’s increases results from its raising its local income tax rate from 2.8 percent to 3 percent.

DLS essentially recommends flat funding grants to qualifying jurisdictions with the highest local income tax rate of 3.2 percent at fiscal 2018 levels. This would reduce the proposed grant to Prince George’s by $1.9 million, Somerset by $268,266, and Wicomico by $498,341.

At the briefing of the analysis before the House Appropriations Committee, the DLS analyst indicated that the Governor had not cut these grants this year, as he had last year- but sometimes DLS “can’t help themselves” from recommending disparity cuts, anyway.

Secretary of Budget and Management David Brinkley testified that the Administration did not concur with the recommendation and instead preferred full funding of the disparity formula according to law. Chair McIntosh said, “good.”

Chair Maggie McIntosh and Delegate Korman asked Secretary Brinkley about his department’s midyear proposal to cut disparity grants, and why they changed their mind and removed it from the agenda.

Delegate Korman sponsored a successful bill during the 2016 session that requires the Secretary of Budget and Management to post on its website notice of a proposed reduction to an appropriation at least three business days before the reduction may be approved by the Board of Public Works (BPW). Upon seeing the proposal posted in accordance with the law last September, MACo sent the BPW a letter requesting they vote against the cut. The cut was then withdrawn from consideration.

Other Quick Links

Payments to Civil Divisions of the State: Budget Analysis

State Funding for Payments to Civil Divisions, Fiscal 2019

MACo Opposition to Mid-Year Cuts for FY 2018

BPW Pares Down FY18 Cuts, Spares the Disparity Grant