This week, Governor Wes Moore introduced a $70.8 billion fiscal 2027 spending plan that, according to the administration, expands funding for housing, education, and public safety while closing a projected $1.5 billion shortfall without increasing taxes or fees.
The governor’s budget increases aid flowing through county governments, but it does not resolve the underlying pressures counties face or meaningfully realign State funding with county responsibilities.
Education funding continues to grow, and transportation aid remains temporarily stable, yet nearly all new “local aid” reflects school funding routed through counties rather than support for county operations.
At the same time, discretionary aid stays flat, transportation funding lacks a long-term path, and the governor’s budget relies heavily on fund transfers and swaps to close gaps.
The accompanying Budget Reconciliation and Financing Act (BRFA) further shifts costs and responsibilities onto county governments.
When combined with the fiscal 2026 actions already absorbed by counties, the cumulative effect approaches $200 million in costs shifted to local governments. These are not hypothetical costs or future exposures; they reflect real, ongoing obligations now embedded in county budgets, layered on top of existing service demands and limited local revenue flexibility.
Budget Toplines
Fiscal 2027 Operating Budget (Introduced)
- Total All Funds: $70.8 billion
- General Fund: $27.7 billion
- Special Funds: Growth driven largely by education and transportation accounts
- Federal Funds: Flat to declining, reflecting broader federal uncertainty
While total spending increases, the General Fund remains constrained, and the budget balance relies heavily on one-time actions, fund transfers, and bond swaps.
What “Local Aid” Means in Practice
Before digging into the numbers, it’s important to be clear about what the State means when it talks about “local aid,” and what that funding actually supports.
When the State budget refers to “local aid,” it primarily means school funding.
Most State aid flowing to counties supports K–12 education, either through formula-driven school aid or related retirement contributions. Counties serve as the funding conduit, but they do not control how school systems spend those dollars. In practical terms, about 85% of all State aid labeled as local aid goes to primary and secondary education.
So while “local aid” may sound like broad support for county governments, in practice it remains overwhelmingly school funding, with counties acting primarily as a pass-through while also bearing major education costs of their own.
That dynamic becomes even clearer when looking at budget growth. Roughly 95%+ of the increase in State aid reflects education funding, including direct K–12 aid and related retirement payments.
State Aid to Local Governments
- Total State Aid: $11.9 billion
- Increase over FY 2026: $370.5 million
- Direct State Aid (excluding retirement): $10.8 billion, an increase of $331.7 million
The governor’s budget provides about $11.9 billion in State aid to local governments in fiscal 2027, an increase of $370.5 million (3.2%) over fiscal 2026.
Nearly all of that growth reflects education spending, including $322.6 million in additional K–12 aid and $38.8 million in related retirement contributions. Other increases remain modest, including $10.7 million for community colleges, $1.6 million for public safety programs, and $1.3 million for libraries.
Education Funding Continues to Drive Growth
Education remains the dominant driver of increased State aid in fiscal 2027. While State school aid increases, counties continue to bear significant responsibility for school construction and operating costs not covered by State formulas.
In fact, the State’s funding model has not kept pace with rising costs, leaving counties to fill staggering gaps in critical areas like:
- Special education – Underfunded by $1 billion annually,
- Student transportation – Underfunded by $500 million annually.
These gaps are not the result of county decisions but rather a state formula that does not reflect actual school system costs. The economic landscape has changed dramatically since the Blueprint’s enactment — COVID-19 disrupted long-term projections, inflation has driven up costs, and uncertainty about federal funding continues to loom.
Primary and Secondary Education
State aid for K–12 education totals $9.1 billion, an increase of $322.6 million (3.7%).
Funding includes:
- Foundation Program formula aid
- Compensatory Education adjustments tied to technical formula changes
- Continued student transportation funding
- Flat funding for nonpublic special education placements following last year’s policy changes
Transportation: Stable on Paper, Constrained in Practice
Transportation aid to local governments remains essentially flat. The proposed budget provides $470.8 million in transportation aid, an increase of just $327,000 (0.1%) from fiscal 2026.
Highway User Revenues (HUR)
- $437.6 million in formula-driven funds for local governments through Highway User Revenues
-
HUR funding remains held at current levels, avoiding immediate cuts
Local governments maintain more than 80% of Maryland’s road miles and rely on Highway User Revenues to fund core transportation needs such as resurfacing, bridge maintenance, and safety improvements. Under current law, the combined share for counties and Baltimore City drops in fiscal 2028 as the temporary distribution expires, resulting in a nearly $100 million reduction from fiscal 2027 levels.
Based on the State’s Consolidated Transportation Program assumptions and applying a modest 2.5% annual inflation factor, that reduction compounds over time. By fiscal 2031, counties and Baltimore City face approximately $520 million in cumulative lost funding relative to a hold-harmless baseline, permanently resetting local transportation funding at a lower level unless the General Assembly acts.
Other Transportation Programs
- Locally Operated Transit Systems (LOTS): Funding continues at current levels
- Elderly and Disabled Transportation: Funding remains unchanged
- Bus Rapid Transit: Lottery-funded allocations continue for eligible jurisdictions
While transportation aid is (temporarily) held harmless, it is not keeping pace with real-world costs.
Public Safety Aid Shows Only Modest Growth
State aid for police, fire, and public safety totals $215.2 million, an increase of $1.6 million (0.8%).
Public Safety Aid includes:
- Formula aid for police protection
- Fire, rescue, and ambulance grants
-
Targeted public safety grants
These programs support important local functions but do not materially change counties’ reliance on local revenues to fund core public safety services.
Disparity Grants and Local Health Funding Hold Flat
Disparity Grants
Disparity Grant funding remains flat at $176.6 million in fiscal 2027. The BRFA proposes to flat-fund Disparity Grants for fiscal years 2027, 2028, and 2029, locking in three years of zero growth for counties with the least fiscal capacity.
Local Health Departments
Public health funding for local health departments is $115.2 million.
Community Colleges: Modest Growth, Then a Cap
State aid for community colleges totals $457.8 million, an increase of $10.7 million (2.4%), with growth capped at 3% annually for fiscal 2027 through fiscal 2029 under the BRFA.
Slowing the growth in the Senator John R. Cade formula for community college funding. Under the formula, the Fund would grow by $32 million in fiscal 2027, or 8%, bringing the four-year growth total to $87 million or 23%. The fiscal plan would reduce the formula by $21 million in fiscal 2027 by capping growth at 3% for three years at any community college.
In addition to direct aid to community colleges, the State pays the entire cost of pension and retirement benefits for eligible teachers, administrators, and other employees on behalf of each community college. The BRFA includes provisions to pass half of the increase in retirement costs over fiscal 2026 to county governments, in perpetuity.
Funding includes:
- Formula aid tied to enrollment
- Targeted support for small colleges
- Workforce and ESOL programs
Budget Reconciliation and Financing Act (BRFA): Cost Shifts and New Mandates for Counties
Beyond topline aid figures, the governor’s budget relies heavily on the Budget Reconciliation and Financing Act (BRFA) to shift costs and responsibilities to local governments.
The BRFA is the legislation that implements the governor’s budget by changing State law, shifting costs, capping formulas, and redirecting dedicated funds to balance the numbers.
These provisions materially affect county budgets and compound pressures on core services.
Retirement Cost Shifts
The BRFA proposes to shift 50% of the increased retirement costs for K–12 education, community colleges, and libraries to local governments, with an estimated $39 million in savings statewide beginning in fiscal 2027. While the State counts associated education funding increases as “local aid,” counties must absorb these retirement costs directly within local budgets.
Community College Caps Limit Formula Responsiveness
Second, the BRFA proposes capping enrollment-driven State aid growth for community colleges at 3% annually for fiscal 2027 through fiscal 2029. This cap limits formula responsiveness during a period of workforce demand and enrollment volatility, even as counties continue to support operating and capital needs at their community colleges.
9-1-1 Trust Fund Raids Shift State Costs Onto Counties
The BRFA further compounds local cost pressures by proposing to expand allowable uses of the 9-1-1 Trust Fund to cover ongoing program operations at the Maryland Department of Emergency Management.
Counties support stable funding for MDEM and recognize its statewide mission. However, redirecting 9-1-1 Trust Fund dollars away from their core purpose undermines the Fund’s original intent: to build, operate, and enhance county 9-1-1 systems.
The 9-1-1 Trust Fund exists to support frontline emergency communications infrastructure. Using those dedicated revenues to backfill State agency operations amounts to raiding a local-focused funding source and risks eroding counties’ ability to maintain and modernize critical 9-1-1 services.
Assisted Outpatient Treatment Shifts Full Program Costs to Counties
The BRFA also proposes a significant new unfunded mandate related to behavioral health services. Under the proposal, counties may establish assisted outpatient treatment (AOT) programs by July 1, 2026, individually or in partnership with other counties.
If a county does not establish a program, the State must do so — but the county must then reimburse the State for an escalating share of the program’s costs, beginning with 25% in fiscal 2028 and rising to 100% by fiscal 2031. This structure effectively guarantees a full local cost obligation over time, regardless of whether the county opts in or the State administers the program.
Disparity Grants Held Flat
The BRFA proposes to level-fund the Disparity Grant program at the fiscal 2026 formula amount through fiscal 2029, cutting the State funding obligation by tens of millions of dollars for counties with the weakest tax bases at a time when costs continue to rise. Flat funding effectively erodes the program’s value over time and provides no capacity for jurisdictions facing growing service demands or economic pressures.
The Bottom Line for Counties
The governor’s fiscal 2027 budget increases funding that flows through county governments, but it does not ease the pressures counties face.
Education aid continues to grow on paper, transportation funding remains temporarily stable, and overall “local aid” rises. At the same time, the spending plan relies on capped formulas, flat-funded programs, and significant cost shifts that push more responsibility onto counties without providing new tools or flexibility.
Taken together, counties face roughly $200 million in new or continued obligations over the last two budget cycles to help balance the State’s books. Those shifts occur even as counties face the same economic uncertainty, inflationary pressures, and service demands as the State. Counties fund schools, build and maintain roads, support public safety, and deliver core services every day. Yet, the State budget increasingly treats local governments as a backstop for unresolved State fiscal choices.
As the General Assembly begins its review, MACo will continue pressing lawmakers to reject cost shifts, protect local revenue capacity, and restore balance to the State–local fiscal partnership. Counties cannot serve as the State’s fiscal backstop without consequences for residents and local services.
Stay tuned to Conduit Street for continued analysis as the budget process unfolds and for advocacy updates as the governor’s budget moves through the Maryland General Assembly.
Useful Links
