The General Assembly today passed a bill to extend enhanced disparity grant funding for counties with proven local income tax effort. Disparity grant funding provides much-needed revenues to counties with limited revenue generation potential to help fund necessary services such as public safety, schools, infrastructure, and community services.

Under current law, the amount of funding received by county governments equals the lesser of the dollar amount necessary to raise the county’s per capita income tax revenues to 75% of the statewide average or the amount received under the cap provision. The current minimum grant amount is 67.5%.

HB 737 repeals the sunset, instead of extending the funding until 2023, as was originally proposed. The bill was also amended to raise the cap from 67.5% to 75%.

From the MACo Testimony:

MACo supports this bill as a reasonable and appreciated effort to mitigate the impact of these caps. The extension of this relief, offered to those aforementioned counties with the maximum local income tax rate of 3.2 percent, offers approximately $8 million a year for two years to support needed public services.

Over the last three years, nine counties have raised their local income tax rates. Just this year, Dorchester and Washington raised their rates to the maximum rate of 3.2 percent. Somerset raised its rate to the maximum rate beginning in calendar year 2017. Caroline recently raised its rate to 3.2 percent in order to fund a new elementary school and sheriff’s department.

This bill will provide needed revenues to counties with limited revenue generation potential, to help fund necessary services such as public safety, schools, infrastructure, and community services. For these reasons, MACo urges a FAVORABLE report on HB 737.

For more on 2020 MACo legislation, visit the Legislative Database.