2021 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 2021 General Assembly. 

County 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 the Maryland General Assembly conducted a legislative session unlike any other due to the enduring COVID-19 pandemic. The unique circumstances surrounding the 442nd legislative session, including necessary health and safety measures, posed a challenge for lawmakers and advocates alike. Despite the unusual circumstances, MACo’s advocacy still led to more positive outcomes for its members.

For more information on Maryland’s response to the COVID-19 pandemic visit MACo’s COVID-19 resource page.

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

State Operating Budget

Notable Budget Decisions

Achieves Structural Balance: Ongoing general fund revenues exceed ongoing expenditures by $79 million in fiscal 2022, and a structural surplus of $121 million is forecast by fiscal 2026.

Preserves Reserves: $2.1 billion in cash resources are preserved including $1.4 billion in the Rainy Day Fund (6.8% of general fund revenues) and $696 million in the General Fund. This exceeds the goals of the Spending Affordability Committee for a $100 million general fund balance and a Rainy Day Fund balance equal to 5.0% of general fund revenues.

Resolves Projected Fiscal 2023 and Fiscal 2024 Budget Shortfalls: The cash balance at the close of fiscal 2022 is more than sufficient to erase the projected fiscal 2023 budget shortfall. In addition, a general fund surplus is forecast through fiscal 2024.

Dedicates One-time Cash to Capital Priorities: The budget supplements the general obligation bond programs with $512 million for pay-as-you-go projects including $80 million of federal stimulus funds for heating, ventilation, and air conditioning improvements at public schools over the next two years.

Responds to the COVID-19 Public Health Emergency: $572 million of federal funding is provided for testing, contact tracing, and vaccinations. The RELIEF Act authorized $687 million of State spending and provided $585 million of targeted tax relief across fiscal 2021 and 2022 to support Maryland’s recovery.

Maintains the State’s Commitment to Public Schools: State support for public schools will exceed $7.5 billion. Direct aid to local school systems will increase an estimated $229.4 million, or 3.5%.

Invests Federal Stimulus Funds in Maryland’s Future: $300 million of federal stimulus funding is allocated to expanding access to broadband by building out the infrastructure and subsidizing service and devices for low-income households. $75 million is invested in workforce training and apprenticeships to enable the unemployed and underemployed to obtain jobs in the evolving economy.

Community College Aid: The budget plan provides $371.5 million for community colleges, a 9% increase over fiscal 2021.

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 589 the 2021 BRFA, that would have compromised county finances. (Read MACo’s testimony on HB 589.)

As introduced, the BRFA proposed to increase counties’ reimbursement of State Department of Assessments and Taxation (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 proposed to incrementally increase this share to 90 percent by fiscal 2025 and each year thereafter. The cost shift would have placed millions of dollars on the backs of county budgets. The General Assembly rejected this cost shift.

The BRFA contemplated dramatic, long-term reductions to community college funding by limiting formula increases to the level of projected general fund growth. Beginning in FY 2023, funding for community colleges would have been restricted to the fiscal 2022 appropriation plus the annual percentage increase in General Fund revenues above the estimated annual increase in General Fund revenues. The Department of Legislative Services estimates that this proposal would cut overall funding for community colleges by approximately $147.5 million by fiscal 2026. The General Assembly rejected this proposal.

Finally, the BRFA proposed that for all settlements entered into beginning in fiscal 2021, a local government would be responsible for 50% of any payments owed by the Board of Public Works (BPW) to an erroneously convicted individual. According to DLS, recent changes to state law may considerably increase the number of grants awarded by BPW. For instance, in fiscal 2020, BPW approved ten grants totaling $22 million. Because county governments have no authority or oversight concerning the prosecution of criminal cases, these grants are properly supported by the State’s General Fund.

The Constitution of the State of Maryland provides that each county and the City of Baltimore shall have a State’s Attorney whose primary responsibility is the investigation and prosecution of all criminal defendants. State’s Attorneys are independently elected state officials and do not come under the authority or supervision of county governing bodies. The decision to prosecute a criminal case or not lies within the sound discretion of the State’s Attorney. Because the ultimate disposition of a petition for compensation is wholly outside of the county government’s control, the General Assembly rejected this cost shift.

Senate Budget Documents

House Budget Documents

For more information on state budget and fiscal affairs-related legislation tracked by MACo during the 2021 legislative session, click here.