Governor Larry Hogan today previewed the administration’s fiscal year 2020 budget proposal. Among the highlights of the $46 billion budget plan, a 4.2 percent increase from the current fiscal year, are a 3 percent pay raise for state employees, $6.9 billion for k-12 education, $438 million for school construction, and $3.3 billion for transportation projects.

The budget also includes $56 million to encourage investment in Maryland’s Opportunity Zones. The Opportunity Zones incentive is a new community investment tool established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities nationwide. Opportunity Zones provide a tax incentive for investors to re-invest their unrealized capital gains into dedicated Opportunity Funds.

The Chesapeake and Atlantic Coastal Bays 2010 Trust Fund is budgeted to receive $53.6 million and more than $1.3 billion will be set aside in reserves.

Governor Hogan will not submit a budget reconciliation bill. In most recent years, the Budget Reconciliation and Financing Act has been used to balance the annual budget plan. Mandated spending has contributed to budgets in which expenditures exceed revenues, resulting in a budget that is out of balance.

A Budget Reconciliation and Financing Act can be used to implement a variety of actions such as raising revenues, altering statutory formulas and mandates, and transferring various monies in special funds to the general fund to allow their use for other purposes, such as balancing the budget.

According to a press release:

This budget also makes prudent use of what is likely a one-time surplus to both save for the future and make critical infrastructure investments. More than $1.3 billion has been set aside to guard against any potential downturn in the economy while still investing $3.3 billion in Maryland’s transportation network and nearly $250 million for a wide range of improvements to facilities or projects that provide services to Maryland citizens, including $63 million in critical maintenance funding to Maryland higher education institutions.

This budget provides $6.9 billion toward our public schools, going above and beyond the levels required by state aid programs. Aid to local schools grows by $347 million, which is the administration’s largest increase to date. The budget also reserves $200 million in state funding to implement the recommendations of the Kirwan Commission.

The governor’s proposed budget also includes the initial investment in the “Building Opportunity Fund,” a transformative and historic five-year, $3.5 billion school construction program. Reflecting that, this year’s school construction budget totals more than $438 million, the most ever in one year.

This budget continues our commitment to our world-class higher education system, providing a record $1.45 billion in state funds for the University System of Maryland, a 4.2 percent increase over last year. This includes $20 million, twice the level of last year, to develop academic programs in science, engineering, cybersecurity, and other critical areas. For the fourth year in a row, undergraduate tuition growth at Maryland’s public four-year institutions will be limited to 2 percent. In addition, this budget includes record funding for the 15 local community colleges funded through the Cade formula and provides funding for the Community College Promise Scholarship and the Governor’s Promise Plus Scholarship. Further, the capital budget includes $325 million for higher education projects.

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The budget also continues to ensure that Maryland’s most vulnerable citizens have access to critical healthcare services and other important programs by containing nearly $11.5 billion for Maryland’s Medicaid program, which provides health coverage to nearly 1.4 million Marylanders, including more than 153,000 children through the Maryland Children’s Health Program. The budget also includes nearly a quarter billion dollars for substance use disorder services, an increase of 20 percent over FY 2019.

Stay tuned to Conduit Street for more information as Governor Hogan will officially submit his budget proposal to the Maryland General Assembly on Friday, January 18.