As counties across Maryland move deeper into fiscal 2026, the latest county revenue outlook points to familiar patterns and growing risks. Property taxes continue to anchor local budgets, but other significant revenue sources show uneven performance and limited growth. At the same time, State budget pressures and cost shifts continue to narrow counties’ fiscal room to maneuver.
As previously reported on Conduit Street, Maryland’s broader fiscal outlook remains strained. Structural deficits, growth in education costs, and reliance on temporary solutions at the State level continue to shape the context in which counties must plan.
The Department of Legislative Services’ latest county revenue outlook shows modest overall growth, with significant variation across revenue sources and jurisdictions.
This revenue picture provides the backdrop for Governor Moore’s fiscal 2027 budget, which increases funding flowing through counties but relies heavily on capped formulas, cost shifts, and flat-funded programs that limit counties’ ability to respond when revenues fall short.
Overall Revenue Growth Remains Modest
County general fund revenues continue to grow, but at a restrained pace. Across major local tax sources, growth remains uneven and closely tied to economic conditions.
Property taxes provide the most stability. Other revenues tied to income, real estate activity, and consumer spending show weaker or more volatile trends.
This pattern leaves counties increasingly reliant on a narrow set of predictable revenues at a time when service demands and cost pressures continue to rise.
Property Taxes Continue to Anchor County Budgets
Property taxes remain the cornerstone of county revenues, accounting for nearly half of all local tax revenues, and providing the most predictable source of funding for county services. That stability remains critical as counties manage education funding, public safety, infrastructure, and debt obligations.
Growth in assessable bases continues to support modest increases in collections statewide. Notably, when property values increase, the increase is phased in equal increments over the next three years. Additionally, every county in Maryland caps the annual increase in taxable home values through the Homestead Tax Credit, ensuring that property tax burdens do not rise too quickly, regardless of market conditions.
This reliance on property taxes underscores why counties feel pressure when State actions shift costs without providing new tools or flexibility to respond locally.
Local Income Taxes Show Slower and Uneven Growth
Local income taxes, the second-largest county revenue source, show slower growth and greater variation across jurisdictions.
Some counties continue to experience modest gains, while others face flat or declining collections tied to wage trends, employment shifts, and broader economic uncertainty.
This uneven performance underscores the limits counties face when relying on income taxes to absorb new costs or offset changes in State funding. Furthermore, as the State budget relies more heavily on income tax volatility, counties face similar exposure without comparable backstops or reserve tools.
Real Estate-Linked Revenues Remain Soft
Recordation and transfer taxes continue to reflect a cooler real estate market.
Higher interest rates and reduced transaction activity continue to weigh on these revenues. Projections show continued weakness compared to recent peak years, with wide variation across counties based on local housing markets.
Because these taxes fluctuate with market conditions, counties generally treat them cautiously in budget planning and avoid relying on them for ongoing obligations.
Economically Sensitive Taxes Remain Volatile
Hotel rental and admissions and amusement taxes continue to reflect broader economic conditions. Hotel rental tax collections have improved from pandemic-era lows, but growth remains modest and sensitive to travel patterns, inflation, and consumer spending.
Admissions and amusement tax revenues show even greater volatility. Some jurisdictions report gains tied to tourism and entertainment activity, while others continue to lag prior levels.
These revenues provide important supplemental funding in some counties, but they do not offer the stability needed to support core services.
The County Perspective: Rising Exposure, Fewer Options
Counties face growing fiscal exposure with little room to adjust. Between last year’s enacted budget and the governor’s introduced fiscal 2027 budget, State budget actions shift roughly $200 million in new or continued obligations onto counties and Baltimore City as part of efforts to 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 recent budget proposals increasingly position local governments as a backstop for unresolved State fiscal choices.
At the same time, counties confront a looming transportation cliff. Under current law, local governments face a nearly $100 million drop in Highway User Revenues in a single year, even though local governments maintain more than 80% of Maryland’s road miles. That reduction would push counties to rely more heavily on property taxes to fund basic road maintenance and routine safety projects.
The governor’s introduced fiscal 2027 budget compounds these pressures through continued cost shifts, capped formulas, and flat-funded aid programs. While some funding flows through counties, the budget embeds long-term cost exposure at the local level without providing new flexibility to manage that risk.
Taken together, these trends leave counties carrying more responsibility, greater fiscal exposure, and fewer tools to close the gap.
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.
