House Budget Proposal Keeps Disparity Grant Funding Intact

The House Appropriations Committee on Friday approved a $46 billion budget that fully funds the Governor’s formula-driven fiscal 2020 allocation of $146,172,853 for the Disparity Grant Program.

For fiscal 2020, disparity grant funding is set to increase for Baltimore City, along with Caroline, Cecil, Prince George’s, Somerset, Washington, and Wicomico counties.

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The Disparity Grant Program provides noncategorical State aid to low-wealth jurisdictions for county government purposes. Disparity grants address the difference in the abilities of counties to raise revenues from the local income tax, which for most counties is one of their larger revenue sources. The Budget Analysis explains how that formula works.

Increases in the disparity in the per capita tax yield compared to the statewide average were the primary reason for the increases in disparity grants in those counties that saw an increase. The exception is Caroline County that sees a $1.2 million increase due primarily to the county increasing its income tax rate to 3.2% for calendar 2019, which means that it receives 67.5% of the uncapped grant amount, rather than 40%.

The Department of Legislative Services in January recommended that the General Assembly concur with the Governor’s formula-driven funding proposal for the Disparity Grant Program.

Other Notable Budget Decisions

  • The Committee approved $320 million to begin implementing the recommendations of the [Kirwan] Commission on Innovation and Excellence in Education.
  • The Committee allocated $500 million for school construction.
  • The Committee voted to appropriate $46 million toward salary increases for state employees not covered by a collective bargaining agreement.
  • The Committee voted to cut funding for the Broadening Options and Opportunities for Students Today (BOOST) Program, which provides a limited amount of scholarships for low-income students to attend private schools. After a lengthy debate, a majority of committee members approved language that restricts future scholarships to applicants who have previously received a scholarship, or their siblings who wish to attend the same school.
  • The Committee nixed a proposal to increase state casinos’ share of gaming proceeds and instead authorized the Governor to dedicate that revenue to special education expenses per the recommendations of the Kirwan Commission.
  • The Committee voted to alter the cap on projected nonwithholding income tax revenues that must be withheld under certain circumstances from general fund revenue estimates from 0.5% to 0.25% in fiscal 2020.
  • The Committee reduced the fiscal 2019 funding for the Sunny Day Fund by $10 million in general funds intended as part of the Amazon incentive package.

The House budget plan maintains a fund balance of $118 million and does not propose any tax or fee increases.

The proposal now moves to the House floor. The Senate Budget and Taxation Committee will begin its budget deliberations on March 12. Any differences between the House and Senate budget proposals will be worked out via a conference committee.

Stay tuned to Conduit Street for more information.

Useful Links

Previous Conduit Street Coverage: DLS: Fully Fund Disparity Grant Formula

Previous Conduit Street Coverage: State Lowers Two-Year Revenue Forecast $269M

Previous Conduit Street Coverage: What Might Be On “Chopping Block” If Revenues Sink?

Conduit Street Podcast: Breaking Down the Kirwan “Blueprint”

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