BALTIMORE SUN: $1.5B budget shortfall projected in Maryland: ‘Outlook is a lot worse’ than earlier estimate

Maryland is facing a nearly $1.5 billion budget deficit for the next fiscal year, lawmakers learned Wednesday during a budget presentation.

The grim projection is fueled by several factors, according to budget analysts who presented it to the Spending Affordability Committee, along with House and Senate Committees on Wednesday. However, the numbers could change ahead of the next General Assembly Session, with more estimates expected in the coming weeks and months.

“The outlook is a lot worse for fiscal [year] 27 than it was at the end of session,” David Romans, DLS fiscal and policy analysis coordinator, said. “It’s about a billion and a half deficit versus a projected small surplus when we ended session.”

Leaders with the Department of Legislative Services point to federal legislative plans, specifically the One Big Beautiful Bill passed under the Trump Administration earlier this year. Romans said the state brought in less revenue than projected earlier in the year due to changes from the OBBB, including raising how much people can write off on their state and local taxes.

“Bottom line is, it was assumed at the end of session that we would get that additional $300 million a year in general fund revenues from the One Big Beautiful Bill being passed,” Romans said. “We actually ended up with a negative impact of about $71 million in fiscal [year] 27. It’s a $371 million swing.”

That plus the deficiencies wipes out about $700 million in anticipated revenues that could have been used for fiscal [year] 27 costs, Romans said. Spending increased as well. Maryland is spending about $800 million more than anticipated, Romans told lawmakers. The largest driver is higher than expected costs for Medicaid, changes in the cost-sharing of SNAP, and education funding, according to Romans.

However, Del. Jason Buckel, a Republican from western Maryland and the House Minority Leader, raised questions about the actual driving factor in the expected future cash cliff.

“Our revenue is actually up, but we are still spending more money to exceed what our revenue growth is. Is that fair,” Buckel questioned.

“Yes, I mean our structural problem is because our revenues continue to grow faster than our ongoing revenue,” Romans responded.

Democrats pushed back on Buckel’s line of questioning, though. Del. Ben Barnes, chair of the House Appropriations Committee, noted that previous projections and estimates couldn’t have included some of the lost revenue from federal programs because they didn’t exist yet.

“When we left session, we made estimates and projections, but we couldn’t — for example — in the Big Beautiful Bill on the corporate tax cut on that,” Barnes said. “We couldn’t have estimated or projected that because it didn’t exist. But now we’ve baked it in.”

The state did end the current budget year with a cash surplus, Barnes noted to counter Buckel’s spending concerns.

“I will say that is largely based on really conservative budgeting and good work from the House, Senate, and the governor,” Barnes said. “That’s what we know.”

However, Romans said fiscal year 2025 closed with $695 million in deficiencies that needed to be paid for in fiscal year 2026 so “that eats up the cash balance.”

“We actually assumed you’d take a couple of million dollars from the rainy day fund to take care of the rest of those deficiencies and that gets you to a $0 cash balance in [fiscal year] 26,” Romans said.

Buckel isn’t alone in his spending concerns. In a statement, Senate Minority Leader Steve Hershey said Democrats in Annapolis “tied Maryland taxpayers to new, expensive, long-term programs” like the Blueprint for Maryland’s Future “with no sustainable plan to pay for them.”

“You can’t spend like there’s no tomorrow and act surprised when the bill comes due,” Hershey said via statement.

Long-term funding for the Blueprint remains a concern in outyears as well. The state is projected to spend about $79 million in general fund dollars in fiscal year 2027; that’s on top of nearly $1.6 billion in dedicated Blueprint dollars going to fund the program in fiscal year 2027 and $1.4 billion in fund balance spending. The state is projected to continue dipping into the general fund for Blueprint dollars in future years; DLS projects by fiscal year 2031, the state could spend as $3.7 billion in general fund dollars for the Blueprint alone.

“Even if you froze spending on everything, all you tried to do was the Blueprint fund swap, you don’t have enough revenue to fully cover it,” Romans said. “So, it illustrates the need for pretty steep cuts across the budget in fiscal [year] 28 … or some revenues in fiscal [year] 28 to bring 28 into structural balance.”

The fiscal cliff jumps in future years, according to the budget presentation from DLS. The forecast shows Maryland will see a $3.1 billion cash deficit in fiscal year 2028 and that number increases to $3.9 billion by fiscal year 2031. Romans urged lawmakers to look at longer-term solutions to structural problems in 2028 when they are working on solutions to fiscal year 2027 as well.

The budget projections are likely to change. The estimates right now don’t fully include the impacts from the federal government shutdown to Maryland, leaders noted. The next Spending Affordability Committee meeting will take place in December.