2020 End of Session Wrap-Up: State Operating Budget

The segments below provide a brief overview of MACo’s work in the area of State budget policy in the 2020 General Assembly. 

2020 Wrap Up Icon - State BudgetCounty governments receive support through multiple state operating budget programs, and shifts in the State’s budget can affect county governments in various ways. MACo seeks county budget security through maintenance of current state funding levels, and new funding programs and enhancements in areas of growth and need.

This year, for the first time in since the Civil War, the General Assembly closed session early on March 18, due to precautionary social distancing measures taken to curb the spread of COVID-19. Consequently, many bills did not have hearings or did not move forward due to time constraints to meet the new deadline. For more information on Maryland’s response to the COVID-19 pandemic visit MACo’s COVID-19 Resource Page.

Follow links for more coverage on Conduit Street and MACo’s Legislative Database.

State Budget

Notable Budget Decisions

Achieves Spending Affordability Committee Goals: The budget achieves the Spending Affordability Committee’s dual goals of leaving a fund balance of at least $100 million and eliminating the structural shortfall in fiscal 2021. The General Assembly’s actions leave a fund balance of $231.3 million and produce a structural surplus of $67 million.

Funds Coronavirus Response: $10 million is included in the fiscal 2020 budget to respond to the pandemic, and separate legislation authorizes the Governor to utilize $50 million from the Rainy Day Fund if necessary.

Preserves Reserves: Almost $1.4 billion in cash resources are preserved including $1.2 billion in the Rainy Day Fund. Collectively, these cash balances equate to 7% of general fund revenues.

Constrains Growth in State Spending: Growth in general fund spending increases $78.6 million or 0.4%.

Education Funding: State support for public schools exceeds $7.2 billion. Direct aid to local school systems will increase an estimated $236.3 million, or 3.8%. The budget plan dedicates $362 million to support the implementation of The Blueprint for Maryland’s Future.

Disparity Grant Funding: 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.

The Disparity Grant Program is fully funded at $158.3 million, an increase of $12.2 million over fiscal 2020, which is due primarily to increases in disparity grant payments to Dorchester, Washington, and Wicomico counties generated by increases in those counties’ income tax rate to 3.2%. Year-over-year funding for Prince George’s County decreases by $255,000, which is a result of an increase in the County’s per capita income tax revenues.

The General Assembly passed legislation to extend enhanced disparity grant funding for counties with proven local income tax effort.

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%.

Budget Reconciliation and Financing Act (BRFA)

The Budget Reconciliation and Financing Act (BRFA) is typically introduced 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.

The General Assembly rejected three proposals in HB 152/ SB 192, the 2020 BRFA, that would have compromised county finances. (Read MACo’s testimony on HB 152/ SB 192).

As introduced, the BRFA would have increased counties’ reimbursement of the State Department of Assessments and Taxation’s (SDAT) functions, including costs of real property valuation, business personal property valuation, and information technology. Since 2013, counties have reimbursed the state for 50 percent of the costs for these functions, but the BRFA proposes increasing this share to 60 percent, permanently. The cost shift would have placed millions of dollars on the backs of county budgets. The General Assembly rejected the cost shift.

In addition, the BRFA proposed dramatic, long-term reductions to community college funding by limiting formula increases to the level of projected general fund growth. Beginning in FY 2022, funding for community colleges would have been restricted to the fiscal 2021 appropriation plus the annual percentage increase in General Fund revenues above the estimated annual increase in General Fund revenues. The Department of Legislative Services estimated that this proposal would cut overall funding for community colleges by approximately $121 million by FY 2025. The General Assembly rejected this proposal.

Finally, the BRFA proposed diverting $5 million per year of Baltimore City’s share of highway user revenues to the Maryland Department of Transportation for four years beginning in fiscal 2021 to support the Howard Street Tunnel project. Diverting local highway user revenues to fund state capital improvement projects sets an alarming precedent, jeopardizing these desperately needed funds. The General Assembly rejected this proposal.

Stay tuned to Conduit Street for more information.

Senate Budget Documents

House Budget Documents

House Appropriations Committee Report on SB 190 – the Budget Bill and SB 192 – the Budget Reconciliation and Financing Act (“BRFA”)

House Appropriations Committee Reprint of SB 190 – (Budget Bill FY2021)

House Appropriations Committee Reprint of SB 192 – Budget Reconciliation and Financing Act of 2020 (“BRFA”)

Stay tuned to Conduit Street for more information.