Maryland relies on county governments to deliver essential community services, including education, emergency services, transportation, and public health programs. However, a new report underscores a growing challenge: As State support shrinks, counties have limited options to meet rising costs.
According to the Department of Legislative Services, the share of State revenues allocated to local governments has steadily declined over the past decade, dropping from 42 percent in fiscal 2013-2014 to just 32 percent in fiscal 2022*.
This ten-year trend highlights a consistent reduction in local aid ratios, forcing counties to rely increasingly on limited local revenues to bridge funding gaps.
While the total amount of State aid has increased during this period, its proportion relative to the State’s overall revenue collection has decreased, placing a growing fiscal burden on counties to meet rising costs.
*Importantly, the DLS analysis excludes certain State aid programs, including Highway User Revenues (HUR), which have faced drastic reductions since recession-driven budget cuts. For example, Baltimore City alone lost approximately $900M in State funds and $3.6B in potential federal matching funds since 2009. Including these figures would reveal an even more severe impact on local governments.
Limited Revenue Options Leave Counties Reliant on Property Taxes
Unlike the State, counties have limited revenue-raising options, and property taxes are the only option for two-thirds of Maryland residents. These residents live in counties already at the maximum local income tax rate, leaving no room to generate additional income through that source.
As a result, property taxes have become the default solution for addressing funding shortfalls caused by State cost shifts. While property taxes are a reliable revenue source, over-reliance on them directly burdens homeowners, contributing to higher housing costs and straining already tight household budgets.
While MACo remains committed to opposing State cost shifts and advocating for proper resources for county governments, enhancing flexibility with local revenue structures is a 2025 MACo Legislative Initiative, as counties need equitable solutions to address growing fiscal demands.
The Bigger Picture
The governor’s 2026 fiscal plan shifts over $100 million in costs to county governments, including nearly all State Department of Assessments and Taxation (SDAT) operational expenses and pension obligations. While the proposed budget outlines some measures to address these shifts, their effectiveness in balancing the additional burdens remains unclear.
Counties are committed to working with the State to address shared challenges and provide essential services to shared constituents.
However, shifting more costs onto counties without the tools to manage them creates unsustainable pressures. Restoring balance in funding responsibilities and allowing flexibility in local revenue options are essential to protect vital services and the communities they support.
Stay tuned to Conduit Street for more information.
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