Shore Delegation: Disparity Grants Shouldn’t Miss a Beat

Eastern Shore Delegation urges the State to restore $15.2 million in veto-driven cuts to county disparity grant funding.

The Eastern Shore Delegation this week sent a letter to the Administration urging a supplemental appropriation to address an anomaly regarding the Disparity Grant program. As previously reported on Conduit Street, MACo last week sent a similar letter to raise concerns about cuts to the Disparity Grant program — which promotes fiscal equity by providing noncategorical state aid to less affluent counties with proven local income tax effort.

The disparity grant is designed to promote equity across jurisdictions to overcome disparate tax bases. The program serves to ensure that counties, who rely on local income taxes for substantial revenue, are able to generate sufficient yield to fund schools, public health, public safety, roadway maintenance, and community services. Counties have made difficult tax rate decisions based on the state law governing these grants – to undermine them would be especially untoward amidst the pandemic.

House Bill 737 of 2020 altered the enhanced State funding by increasing the minimum grant amount from 67.5% to 75% of the 2010 grant and repealing the termination date for the enhanced funding. As a result, eligible jurisdictions would have been able to receive at least 75% of their formula allocation under the disparity grant program beginning in fiscal 2022.

However, citing budget weaknesses arising from the COVID-19 pandemic, the Governor vetoed the bill. The veto was subsequently overridden by the General Assembly during the 2021 session. Since the Administration cannot be required to fund the mandated appropriation in the current budget bill, six counties will be subject to the 60% minimum grant in fiscal 2022.

As such, six low-wealth jurisdictions lost $15.2 million in needed disparity grant funding for the year ahead. They are building their budgets now, and need this certainty urgently.

According to the Eastern Shore Delegation letter:

To help fund major capital projects in their counties: Dorchester and Somerset Counties raised their income taxes to the maximum rate last year, and commissioners in Caroline County raised their income tax rate during an election year to pay for their first new school in 50 years. These counties have since budgeted according to the agreed upon numbers established in Chapter 472.

Adding to the hardships from the COVID-19 pandemic by cutting the disparity grant program for these poor counties will have devastating results. We know that your department, and the Governor have our best interests in mind; we hope that you will provide a solution to this problem for the upcoming budget year and include the $15 million in a supplemental appropriation.

Stay tuned to Conduit Street for more information.

Useful Links

Previous Conduit Street Coverage: MACo to State: Disparity Grants Shouldn’t Skip a Beat

Eastern Shore Delegation Disparity Grant Letter

MACo Disparity Grant Letter

Department of Legislative Services Analysis of the Disparity Grant Program

Previous Conduit Street Coverage: Governor Vetoes Kirwan, Tax, Fiscal Bills in Silent Session Cap-off

HB 737 – Local Governments – Income Tax Disparity Grants – Amounts (2020)

MACo Testimony on HB 737 (2020)

Previous Conduit Street Coverage: Disparity Grants

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