Just days into the new fiscal year, Governor Wes Moore proposed significant budget reductions for fiscal 2025. These proposed cuts, totaling $148.56 million, would affect various State agencies and programs and have substantial implications for county governments.

Under §7-213(a) of the State Finance and Procurement Article, the governor, with the approval of the Board of Public Works (BPW), can reduce any legislative appropriation in the State operating budget by up to 25 percent if deemed unnecessary. The BPW will consider the proposed cuts at its next meeting on July 17, 2024.

In a Baltimore Sun Op-Ed, Governor Moore explained that the proposed budget reductions are part of a broader strategy to address long-term structural budget challenges without raising taxes on Marylanders. He stressed the importance of fiscal discipline, noting that cuts are needed to cover faster-than-expected childcare costs and Medicaid increases.

For context, the proposed cuts represent approximately 0.24 percent of the State’s $63.1 billion general fund budget.

Proposed Cuts: County Impacts

Note: MACo is actively analyzing the proposed budget reductions and their implications for county governments. This overview represents an initial assessment. Stay tuned for more information.

Public Safety and Emergency Management

• Local Law Enforcement Grants: The Governor’s Office of Crime Prevention, Youth, and Victim Services faces a proposed $5 million reduction, which would impact local law enforcement agencies’ funding for essential programs, including the Warrant Apprehension & Absconding Grant Program and the Police Accountability, Community, and Transparency Grant (PACT).
• Maryland Department of Emergency Management: A proposed $750,000 reduction affects disaster recovery and emergency management capabilities at the county level, reducing the funding for the Mesonet project and the new State Disaster Recovery Fund.

Health and Human Services

• Core Public Health Services: Local health departments would see a $12 million reduction in funding, impacting their ability to provide essential public health services. This cut represents a decrease of nearly 10 percent from the original allocation of $123.2 million.
• Department of Human Services: The Local Family Investment Program faces a proposed $950,000 reduction, which would affect services to assist low-income families across the state.

Information Technology

• Department of Information Technology: The proposed cuts include a $15.63 million reduction to the Major Information Technology Development Project Fund. This fund supports large IT initiatives for Executive Branch agencies and commissions, except for public higher education institutions. Cuts to this fund could delay or halt significant IT projects that enhance county operations and services.

Community Services and Aging Programs

• Department of Aging: The proposed cuts include a $1.2 million cut from the Long-Term Care and Dementia Care Navigation Programs, reducing the funding for essential services supporting older Marylanders. Additionally, a proposed $300,000 cut in general administration funding could impact planning and stakeholder engagement at the county level.

Agriculture / Rural Maryland Council

• Department of Agriculture: The proposal cuts $2.25 million from the Rural Maryland Council (RMC) grant-making funds and reduces funding for the Maryland Native Plants Program and the Urban Agriculture Grant Programs, which could impact county agricultural programs.

The RMC’s initiatives significantly impact the 18 rural counties in Maryland by supporting local development projects, enhancing economic opportunities, and improving the quality of life for residents. The Council’s efforts are crucial in helping rural jurisdictions overcome their unique challenges and thrive in a competitive environment.

State Faces Looming Budget Deficits

As discussed on a recent episode of the Conduit Street Podcast, the three rating agencies rated Maryland GO bonds AAA. However, while Standard and Poor’s (S&P) and Fitch continue to rate Maryland’s outlook as stable, Moody’s revised its outlook for Maryland to negative.

A state’s bond rating, or credit rating, is crucial because it affects the interest rate a state pays on bonds it sells to investors. The rating also indicates a state’s ability to fulfill its future financial obligations and the likelihood of default.

While all three rating agencies noted Maryland’s credit strengths, including high wealth and income levels, a broad and diverse economy, robust and well-embedded financial practices, strong debt affordability management and rapid debt amortization, and adequate reserves and liquidity, Moody’s cited “expected structural imbalances and planned depletion of General Fund surplus through fiscal 2025, which threatens to undermine performance relative to peers.”

The Department of Legislative Services (DLS) anticipates that the State’s structural deficit will grow from $483 million in fiscal 2025 to $3.7 billion by fiscal 2029, meaning ongoing spending will far exceed projected revenues.

As previously reported on Conduit Street, the cash and structural budget outlook deteriorates substantially through 2029 primarily because the costs of ongoing K-12 education enhancements outpace the availability of special funds in the Blueprint for Maryland’s Future Fund, the fund dedicated to implementing the Kirwan Commission on Innovation and Excellence in Education’s recommendations.

With actions taken in the fiscal 2025 budget and Budget Reconciliation and Financing Act (BRFA), Blueprint resources provide adequate funding for Blueprint programs through fiscal 2027. However, by the end of fiscal 2027, the Blueprint Fund will be exhausted, resulting in substantial K-12 costs shifting to the general fund beginning in fiscal 2028.

Stay tuned to Conduit Street for more information.