The Maryland Senate has passed the Budget Bill (SB 282) and the Budget Reconciliation and Financing Act (SB 284), advancing both measures to the House of Delegates.
The Senate plan largely mirrors Governor Moore’s overall spending level, maintaining a roughly $70.8 billion budget while closing a projected $1.5 billion structural gap through fund transfers, targeted reductions, and financing adjustments.
The plan leaves approximately $2.2 billion in the Rainy Day Fund, about 8% of general fund revenues, along with a $250 million cash surplus. While these reserves provide short-term stability, underlying structural pressures remain.
Recent revenue performance adds to that uncertainty. The 3% sales tax on IT and data services, originally projected to generate roughly $500 million annually, has produced just $35 million through the first two quarters of fiscal 2026. Updated estimates now project $112 million this year and $220 million next year, well below expectations.
Counties Push Back, Senate Scales Back Several Proposals
As previously reported on Conduit Street, MACo urged the General Assembly to reject BRFA proposals that would shift additional costs onto county governments or weaken existing funding commitments. The Senate Budget and Taxation Committee responded by scaling back or removing several of those proposals.
Most notably, lawmakers limited the proposed teacher pension cost shift to $39.3 million in fiscal 2027, rejecting the $78.6 million full shift recommended by the Department of Legislative Services.
Disparity Grant Reduction Rejected
The Senate committee rejected a proposal to cut $27 million from the Disparity Grant program and freeze funding for multiple years.
The Disparity Grant program targets counties with weaker tax bases that already make above-average local tax effort. It serves as one of the State’s primary tools to address structural fiscal imbalance across jurisdictions.
The proposed reduction, combined with existing statutory caps, would have pushed funding tens of millions of dollars below the formula-driven level, further widening the gap between counties with strong tax bases and those with limited capacity.
For affected jurisdictions, this is not discretionary funding — it supports core services and helps offset structural limitations in local revenue capacity. Reducing or freezing this funding would have forced difficult choices between higher local taxes and service reductions in counties with the least flexibility to absorb additional costs.
By rejecting this proposal, the Senate preserved a critical component of the State-county fiscal partnership and avoided deepening inequities among jurisdictions.
9-1-1 Trust Fund Changes Rejected
The committee also rejected a proposal to expand allowable uses of the State’s 9-1-1 Trust Fund.
Counties and Baltimore City rely on these funds to support emergency communications infrastructure and ongoing upgrades to Next Generation 9-1-1 systems. Removing the provision preserves funding dedicated to local public safety operations.
Cost Shifts Remain
While the Senate avoided several significant proposals, the plan still includes provisions that increase county fiscal exposure beginning in fiscal 2027.
That pressure forces difficult choices between higher taxes and reduced services. In practice, those costs are borne directly by property taxpayers. Most counties have little flexibility in their local income tax structures. When the State shifts costs or limits formula growth, counties must either reduce core services or rely more heavily on property taxes, increasing housing costs for homeowners and renters alike.
Counties remain committed to balanced solutions. However, State budget stability cannot depend on continued cost shifts and reductions in formula support that weaken county budgets and threaten essential services.
Teacher Pension Cost Shift
The Senate adopted a partial shift of $39.3 million in pension costs to local governments, community colleges, and libraries, representing roughly half of the year-over-year increase in required employer contributions. Senators rejected a proposal from the Department of Legislative Services that would have shifted the full $78.6 million increase.
Although the Senate avoided the larger shift, the adopted provision still creates new ongoing costs for county governments.
Behavioral Health Mandate
The Senate also retained a provision tied to court-ordered behavioral health treatment programs that potentially requires counties to reimburse the State for escalating costs.
MACo has consistently maintained that policies of this scope warrant standalone legislation and full fiscal review, rather than inclusion in the budget reconciliation process.
New Provision: Law Enforcement Funding Withheld
The Senate plan includes a provision withholding approximately $124 million in State aid to local law enforcement agencies until each department certifies that it does not participate in federal immigration enforcement activities.
This approach ties funding for core public safety functions to a certification requirement outside traditional funding formulas, introducing new uncertainty for local law enforcement funding.
What’s Next
The Budget Bill and BRFA now move to the House for consideration.
Differences between the Senate and House versions will require conference committee negotiations later in the session.
MACo will continue advocating in the House to address remaining cost shifts and protect counties from additional fiscal pressure as the budget moves toward final agreement.
Stay tuned to Conduit Street for updates.
Useful Links
MACo: State Budget Plan Pressures Counties Toward Higher Taxes or Service Cuts
