Wicomico Acting County Executive John Psota today sent a letter to Secretary of Budget and Management David Brinkley urging the Administration to address an anomaly regarding the Disparity Grant program. As previously reported on Conduit Street, MACo 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 letter from Wicomico County Executive Psota:
I write today to urge the Department to address an anomaly regarding the Disparity Grant program. Wicomico County requests that the Department work with the Governor and the Maryland General Assembly to restore veto-driven cuts to the program.
Wicomico County stands to lose $2.6 million in essential funding.
Cutting the disparity grant program will have a disproportionate effect on less affluent counties and exacerbating pressures at the local level by undermining county revenue structures and support for education, public health, public safety, and other essential services.
Wicomico County and the Maryland Association of Counties (MACo) are prepared to work with the Administration on this issue, and other considerations, as part of a responsible balanced budget plan. I hope that the Administration recognizes that burdens on county budgets are substantial, and these challenges would only be worsened by added cost shifts or disproportionate budget cutbacks on county programs.
Stay tuned to Conduit Street for more information.
Previous Conduit Street Coverage: Shore Delegation: Disparity Grants Shouldn’t Miss a Beat
Previous Conduit Street Coverage: MACo to State: Disparity Grants Shouldn’t Skip a Beat
Wicomico County Disparity Grant Letter
Eastern Shore Delegation 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)