A Look at the State’s 2019 Capital Budget

The Maryland Department of Legislative Service’s 90 Day Report, a review of legislation passed during the General Assembly’s last term, includes an overview of the capital budget which is relevant to Maryland’s county governments.

The Department of Legislative Service’s annual review of legislation passed during the General Assembly’s most recent term is a handy tool for understanding policy changes. It is also a quick way to keep up-to-date on the State’s capital budget.

The State’s capital budget is relevant to county governments in at least two ways. First, county governments are the recipients of state capital funding. These include funds for  local projects identified by the General Assembly, and school construction dollars.

A second reason for county interest in the State budget is that the State’s capital budget reveal the State’s ability and/or willingness to take on debt to invest in infrastructure projects. The State’s financial health and fiscal policies may be an indication of economic trends that have been or will be experienced also in Maryland’s counties. And, a sense of the State’s capital budget expenditures can help counties predict whether local capital funding may be increased in future years, or threatened.

School Construction Capital Funding

The General Assembly passed a fiscal 2019 capital program totaling $4.622 billion, according to the Department of Legislative Services. Less than $100 million of the capital budget is directed toward local projects, and about $440 million is provided for school construction.

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Maryland Department of Legislative Services’ 90 Day Report, “FY 2019 Capital Program Uses.”

The school construction capital funding includes the following:

For public schools:

  • Public School Construction Program $313,900,000 (where most state contributions to K-12 school construction come from)
  • Aging Schools Program: $6,109,000 (generally for smaller repair-type projects to keep older schools up-to-date)
  • Supplemental Capital Grant Program $68,200,000 (a special program to help school systems with high enrollment and a high number of relocatable classrooms)
  • Public School Safety Improvements $20,000,000
  • Heating, Ventilation and Air Conditioning Improvements $15,000,000

For Private Schools:

  • Nonpublic Aging Schools Program $3,500,000
  • Nonpublic Schools Safety Improvements $3,500,000

State Capital Budget Spending

The fiscal 2019 capital program totals $4.622 billion, slightly more than the fiscal 2018 capital program, which totaled $4.579 billion. In both years, the Capital Debt Affordability Committee (CDAC)  recommended that no more than $995 million in new general obligation bonds be issued for each year in the five year planning cycle. As described by the Department of Legislative Services with regard to the CDAC’s 2017 report,

The recommendation, the same recommendation made by the committee in its previous two annual reports, is intended to slow the growth in debt service costs and provide additional debt capacity in the out-years. –Department of Legislative Services 90 Day Report

In both years, the General Assembly’s Spending Affordability Committee acknowledged this advisory recommendation, but instead of limiting new issuances to $995 million, the General Assembly implemented a 1% cap on new issuances, using the fiscal 2016 level of $1.045 billion as the starting point.

As described by the Department of Legislative Services, the Spending Affordability Committee (SAC) was concerned about limiting debt growth considering the increased cost of construction – something also experienced firsthand by county governments building schools.

While supporting the objective to slow the growth in debt service costs and reduce the debt service to revenue ratio, SAC was concerned that the CDAC recommendation to freeze the authorization level through the planning period would reduce the purchasing power of the capital program due to the impact of construction inflation. –Department of Legislative Services 90 Day Report

 

The Maryland Consolidated Capital Bond Loan program for fiscal 2019 implements the 1% cap adopted by the Spending Affordability Committee.

See the 90 Day Report’s Capital Budget Summary for more information about the State’s capital budget for 2019.

 

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