2024 End of Session Wrap-Up: State Operating Budget

The segments below provide an overview of MACo’s work on State budget policy in the 2024 General Assembly session. 

County governments receive support through multiple state operating budget programs, and shifts in the State’s budget can have widespread implications for counties. MACo seeks county budget security by maintaining current State funding levels, new funding programs, and enhancements in areas of growth and need.

Maryland’s 446th legislative session convened amidst a substantial concern over the State’s fiscal situation, with weakened revenues and cost increases for many services at every level of government. Despite the fiscal limitations, a wide range of policy issues received a full debate, with many resolutions arising from the 90-day annual process. MACo’s legislative committee guided the association’s positions on hundreds of bills, yielding many productive compromises and gains spanning counties’ uniquely wide portfolio.

Follow these links for more coverage on our Conduit Street blog and Legislative Database. 

The Maryland General Assembly sent a $63 billion budget and companion reconciliation bill to Governor Wes Moore’s desk. Here are some highlights:

State Operating Budget

Notable Budget Decisions

Meets Spending Affordability Goals: Both the general fund balance of $128 million and the structural shortfall of -$439 million surpass the Spending Affordability Committee (SAC) goals of $100 million fund balance and -$508 million structural balance.

Preserves Reserves: About $2.4 billion in cash resources are preserved, including $2.3 billion in the Revenue Stabilization Account (Rainy Day Fund) (9.4% of general fund revenues) and $128 million in the General Fund.

Raises Ongoing Revenues to Address the State’s Transportation Needs: Generates $257 million of revenues in fiscal 2025 by raising vehicle registration fees, establishing a Transportation Network Company impact fee for each passenger trip, collecting an annual registration surcharge from owners of zero-emission and plug-in electric vehicles, raising the dealer processing charge, and increasing fines for speeding in work zones through Senate Bill 479.

Strengthens the State’s Emergency Medical System: Almost $105 million of new revenue is dedicated to emergency medical services beginning in fiscal 2025, including about $46 million to eliminate a projected structural deficit for the Emergency Medical Systems Operations Fund, which supports the State police aviation command, coordination of Maryland’s emergency medical system, and grants to locals for fire and rescue equipment; $41 million for shock trauma; and $18 million to expand reimbursements from the Maryland Trauma Services Fund.

Improves the Financial Condition of the State’s Blueprint Fund: The budget erases the projected fiscal 2027 Blueprint Fund shortfall by increasing taxes on cigarettes, certain other tobacco products, and electronic smoking devices and dedicating both the new revenues and a portion of existing tobacco tax revenues to the Blueprint Fund. Other actions improving the health of the Blueprint Fund include reducing fiscal 2025 spending and transferring $40 million from the School Construction Revolving Loan Fund.

Restores Funds for Legislative Priorities: The budget restores funds for legislative priorities that the governor proposed reducing, including almost $10 million for community colleges, nearly $6 million for resiliency activities, $5 million for pediatric cancer, and $1 million for warrant apprehension grants.

Adds Funds to Meet Debt Service Obligations and Creates Capacity for Legislative Capital Priorities: The budget shifts $111 million of capital projects from general obligation (GO) bonds, freeing up GO bond capacity for legislative priorities in the capital budget. Other notable legislative additions include $21 million for debt service, $10 million 1 for rental housing, $4.2 million to expand eligibility and increase the minimum benefit for the Supplemental Nutrition Assistance Program benefit for seniors, $4 million for police accountability grants, $3.6 million for home detention monitoring, $3.6 million to increase the amounts deposited in health reimbursement accounts of certain State retirees transitioning to Medicare Part D, and $1.8 million for rape crisis centers.

Earmarks Funds to Assist Individuals and Businesses Impacted by the Reduced Operations of the Port of Baltimore: The Governor is authorized to withdraw up to $275 million from the Rainy Day Fund for this purpose contingent on the enactment of legislation.

Increases Funding for Public Schools: State support for public schools will total $9.1 billion. Aid to local school systems increases an estimated $457.1 million, or 5.3%.

Boosts State Employee Salaries and Funds Other Initiatives to Facilitate Recruitment and Retention in a Highly Competitive Labor Market: The budget includes $454.7 million for fiscal 2025 salary increases, including a 3% cost-of-living adjustment (5% for members for law enforcement officers), employee salary increments, bonus increments for employees with 4.5 years or more of service, targeted salary increases for hard to fill positions, and bonuses for certain public safety workers.

Continues to Provide Vital Health Care Services: Medicaid funding totals $14.4 billion, allowing the State to provide coverage to over 1.6 million residents. The budget funds 3% rate increases for providers serving the developmentally disabled, behavioral health providers, nursing homes, and most Medicaid community-based providers.

Enhances Funding for Public Safety and Maintains Support for Victim Services: The budget funds police aid at $121.4 million, $46 million above the statutorily required amount. New funding of $8 million is provided for gun violence prevention and intervention programs, while $10.3 million is invested in community-based services for juveniles and services to families residing in communities with high crime rates.

Supports Families with Children: Almost $488 million of new funding is allocated to the childcare scholarship program to address shortfalls in fiscal 2023 and 2024 and adequately fund the fiscal 2025 budget. The program has seen participation more than double since January 2021 to more than 31,000 children. Conference actions also prohibit planned increases in co-payments.

Invests in the State’s Climate Pollution Reduction Plan: The budget includes $90 million for climate pollution reduction efforts, including $17 million for grants to purchase/lease electric school buses, $23 million to install vehicle charging infrastructure, and $50 million for grants to electrify hospitals, schools, multi-family housing, and other community buildings.

Budget Reconciliation and Financing Act (BRFA)

The Budget Reconciliation and Financing Act (BRFA) reconciles various provisions incorporated into the Administration’s fiscal 2025 plan, bringing the proposed budget into balance for the year. MACo appreciates the difficult task of constructing a balanced budget plan. However, counties raised concerns about specific components of the BRFA and their future effect on local governments. (Read MACo’s testimony on SB 352/HB 352.)

Highway User Revenues – Local Roads and Bridges Had Been On the Chopping Block

The General Assembly rejected stark cuts in the fiscal 2026 and 2027 funding for locally-managed roads and bridges through the Highway User Revenue formula. This decision avoids a reduction of over a quarter billion dollars across those two coming years. It sets the stage for a more considered plan for global transportation funding in the years ahead.

Unlike most states, local governments in Maryland maintain the lion’s share of the state’s roads and bridges. However, county governments have no authority to levy their own transportation revenues – counties depend entirely on a share of state-levied revenues to support safety and maintenance work on local roads and bridges across the state.

For decades, the State supported a balanced approach to maintaining its transportation infrastructure. The bulk of transportation revenues—mainly motor fuel and vehicle titling taxes—have been split between the State (for its consolidated Transportation Trust Fund, serving multiple modes) and local governments (who own and maintain roughly five of every six road miles across the state). For many years, the share sent to local governments was 30 percent of that total.

The State faced a mid-year budget crisis during the depths of the “Great Recession” in 2009. In turn, the Board of Public Works adopted a 90% reduction of the local distributions of these Highway User Revenues and a roughly 40% reduction to Baltimore City’s allocation (the largest by far to any jurisdiction). Since then, many service areas have fully or primarily restored recession-driven cutbacks. This is not the case with Highway User Revenues – they remain far behind historic levels, even after the State has enacted a substantial transportation revenue increase.

The $396 million in the proposed budget plan for fiscal 2025 remains far short of Maryland’s proper and historic funding levels, even on a simple dollar-to-dollar basis. Accounting for road maintenance and materials costs would expand this gap even further.

HB 1187 / SB 726 of 2022 increased local jurisdictions’ highway user revenues by an estimated $51.9 million in fiscal 2024, $190.3 million in fiscal 2025, $241.5 million in fiscal 2026, and $245.6 million in fiscal 2027.

However, the governor’s Budget Reconciliation and Financing Act (BRFA) proposed to slash funding for local roads and bridges across the state by eliminating planned increases in fiscal 2026 and fiscal 2027.

MACo and county leaders urged state policymakers to resist these deep cuts and advance a sustainable solution to address critical infrastructure needs across the state. In advancing such a plan, MACo argued that proper restoration of the Highway User Revenues formula should itself be a priority to create sensible and reliable support for all locally maintained roadways.

The General Assembly rejected drastic cuts in the fiscal 2026 and 2027 funding for locally-managed roads and bridges through the Highway User Revenue formula. This decision avoids a reduction of over a quarter billion dollars across those two coming years. It sets the stage for a more considered plan for global transportation funding in the years ahead.

Dramatic, Deep Funding Cuts for Maryland’s Community Colleges

The General Assembly partially restored proposed funding cuts to Maryland’s 16 community colleges, holding funding stable while the State studies ways to update and modernize the Cade funding formula.

The Senator John R. Cade funding formula – which bases community college funding on a percentage of the appropriation per full-time enrollment student (FTES) at four-year public higher education institutions − aims to provide community colleges with predictable operations support and help maintain affordable tuition rates.

However, for 25 years, the State employed formula-rebasing techniques to decrease community college funding or delay full funding of the formula, resulting in a lengthy history of imbalance in state support of its community colleges compared to public four-year colleges. From 2009 to 2022, the State shortchanged community colleges by over $140 million, further harming Maryland’s most vulnerable student population.

For the past two years – for the first time – the State fulfilled its obligation to fully fund Maryland’s community colleges. Achieving this goal is more than just receiving an increase − it is a recognition that students enrolled in community colleges deserve the same level of support as those in public universities.

When fully funding the Cade formula, the State supports equitable access to higher education for all Marylanders. However, by rebasing one formula, the State effectively prioritizes one segment over the other.

The BRFA proposed several provisions to permanently alter the Cade formula, including arbitrarily changing the enrollment calculation and lowering the funding provided per FTES compared to the four-year schools from 29% to 26.5%. This proposal would have cut approximately $22 million in funding for community colleges in fiscal 2025 and millions more in the out years.

When state funding lags, additional pressure builds on county budgets and student tuition. As county governments are similarly facing budget constraints, these cuts would result in tuition increases at a time when training and education opportunities are most needed.

The proposed cuts came as community enrollment is up by eight percent. In addition, because the Blueprint for Maryland’s Future places increased roles and responsibilities on community colleges through dual enrollment and college and career readiness (CCR), MACo argued that these proposed cuts were particularly untoward.

The General Assembly restored $10 million from the proposed fiscal 2025 funding cut. For fiscal 2025, community colleges will receive $384.8 million (a -2.2% decrease from fiscal 2024 instead of a -5% as initially proposed in the BRFA).

Local Health Departments — Matching Funds

The General Assembly ensured counties will avoid a significant fiscal shock to local health funding in fiscal 2025.

The State began funding local health departments and services over a half-century ago. Local governments must match these State core funds according to percentages established in 1996 based on each jurisdiction’s revenue-raising ability. This matching fund requirement has been a relatively trivial matter for years, as local contributions frequently dwarf the match requirement.

However, in fiscal 2024, the State allocated new funding for their employees stationed at both state and local agencies, and curiously, this non-core discretionary salary increase was apparently included in the local match calculation. Counties were informed about this calculation after their budget cycle was completed for fiscal 2024 – creating an unanticipated increase in local funding requirements (in one county nearly tripling its match amount from the year before). This oddly timed exchange resulted in a series of questions and eventual waivers – leading in part to the DLS requested report (due in the fall of 2024) to sort out these various funding streams more clearly.

Counties — currently building the local budget for fiscal 2025 — were told to expect additional increases. However, they have not received a forecasted estimate or a clear explanation of the formula base.

BRFA language clarifies that the matching fund requirement for local health department funds should not apply to salary-related or similar discretionary funding, and for fiscal 2025, it should not exceed the county’s actual funding amount from fiscal 2024.

Following the study suggested by DLS and agreed to by the Maryland Department of Health, refinements or clarifications can be introduced in subsequent sessions if the Department seeks to create new statutory matching obligations based on other funding streams.

Disparity Grants

The General Assembly agreed to study the Disparity Grant funding formula, including ways to address program variability.

The Disparity Grant Program promotes fiscal equity by providing noncategorical state aid to less affluent counties with proven local income tax efforts. The program ensures that counties that rely on local income taxes for substantial revenue can generate sufficient yield to fund education, public safety, roadway maintenance and safety programs, and other essential services upon which residents rely.

State-imposed “caps” in this program artificially lessen the effective revenue from such jurisdictions, including those who have exercised the maximum county income tax rate. Over the past five years, cap provisions have reduced state funding under the disparity grant program by approximately $233 million.

This year, the variability in the program − mainly arising from the volatility in non-wage income as a part of this year-by-year formula − triggers a funding decline of over $31 million for fiscal 2025, including a $29 million loss in Prince George’s County alone.

Cutting the disparity grant program will disproportionately affect less affluent counties and exacerbate pressures at the local level by undermining county revenue structures and support for schools, transportation, public health, and other essential services and programs.

The General Assembly agreed to study the Disparity Grant funding formula, including ways to smooth out stark changes in year-to-year aid for less affluent counties with proven local income tax efforts.

Senate Budget Documents

House Budget Documents

Conference Committee Documents

Supplemental Budgets