Gov. Wes Moore (D) unveiled his first state budget on Friday, a $63.1 billion spending plan that includes increases for education and transportation programs, no new taxes and a suite of legislative initiatives intended to create a more “competitive and equitable economy” in the state.
While lawmakers were still sifting through details on Friday, the plan was largely praised by Democrats in the General Assembly.
“Overall, I think it was very much a budget of shared values,” Sen. Bill Ferguson (D-Baltimore City) said.
“It recognizes the shared priorities of the legislature and the governor in a way that we haven’t seen in recent years,” said Del. Ben Barnes (D-Prince George’s), chair of the House Appropriations Committee, which will move the budget bill first this legislative session.
Moore also used the budget announcement to focus on some of his administration’s bigger picture priorities, including growing Maryland’s economy to make it more competitive with surrounding states.
Moore reiterated his campaign position that Maryland is a state that’s “asset rich and strategy poor.”
Budget Secretary Helene Grady said that, according to the U.S. Bureau of Economic Analysis, Maryland’s gross domestic product grew by 11% over the past decade, while the national economy grew by 23%.
Moore said the state had specific opportunities to grow the economy by expanding the scientific and technical services sector, investing in education and passing other targeted bills to improve economic outcomes for individual Marylanders.
Grady said the administration’s focus on economic growth “underpins our ability to make progress on all the other priorities.”
The proposed budget spends down the state’s rainy day fund to the legislatively recommended rate equal to 10% of general fund revenues, or $2.5 billion, and projects an $820 million general fund balance at the end of the fiscal year.
Both balances are lower than those projected at the end of this current fiscal year, which total $5.2 billion.
Some Republican lawmakers expressed concern about the long-term viability of the spending plan.
“I would hope, to the greatest degree practicable, that these historic budget surpluses are moved to state savings accounts or devoted to a reasonable middle-class tax cut for Maryland’s hard-working families allowing both to prepare for a possible economic downturn,” House Minority Leader Jason Buckel (R-Allegany) said in a statement. “It is not enough to tout the lack of tax increases in a budget year if the level of spending will require tax hikes down the road. It is important to be principled and disciplined now, so we don’t burden our taxpayers later.”
Moore administration officials stressed that the governor’s budget plan “intentionally and strategically” spends down the surplus and is balanced for the next five fiscal years.
Moore officials said a strong national economy during the prior two fiscal years, as well as federal stimulus programs, led to a windfall for the state — but a sharp break to more challenging economic conditions means they should proceed cautiously.
“There are very real economic headwinds that we are facing. And so we’re going to proceed carefully, we’re going to proceed responsibly, but we’re also going to proceed with a real sense of hope and ambition on the big things we have to accomplish,” Moore said.
Efforts to boost economy
Two of Moore’s major priorities in spending down the current reserves are education and transportation. The governor will make a one-time cash payment of $500 million into the Blueprint for Maryland’s Future Trust Fund, the state’s savings account for a decade-long education reform effort. He will also dedicate $500 million to new transportation projects, to get people “from where they live to where opportunity lies.” Moore declined to specify what projects would be funded, saying he wants those decisions to lie with his new transportation secretary, who will be appointed “very soon.”
Adding to the effort to strategically invest, Moore said he hoped the transportation boost would be matched with additional federal funding.
The investment in the Blueprint could help hold off a depletion of that fund within the next five years. While the education fund is expected to have a $2.2 billion balance at the end of Moore’s fiscal year 2024 budget, the fund would have a near-zero balance in 2026 and become overextended in 2027, according to projections.
Moore said the half-billion payment this year is a “down payment” to show that his administration supports the reform effort. Asked whether new taxes or fees will be needed to shore up the fund in the future, Moore said it was important that his administration and the legislature, along with local governments, start conversations about the fund’s long-term sustainability now, while it has a surplus.
One major source of intended revenue for the education reform fund – a first-in-the-nation tax on digital ad sales – has been tied up in legal challenges since it was passed in 2021.
The outlook for the Blueprint fund turned negative just recently, when Dec. 1 enrollment counts from state public schools showed an unanticipated increase in the number of students who qualify for free and reduced-price school meals. So-called FARMS students are a major driver in the state’s new education funding formula, which directs more state funding to schools with higher concentrations of poverty.
The half-billion-dollar Blueprint payment is in addition to fully funding the state’s public schools at $8.8 billion, a 10% increase from the current year.
The proposed education budget also includes $15 million for a new teacher recruitment incentive that will be part of the Maryland Educator Shortage Act.
Moore’s administration will also introduce at least four bills in conjunction with the budget, meant to build a “competitive and equitable economy:”
- $171 million is budgeted for the Family Prosperity Act, which would make permanent an expansion of the Earned Income Tax Credit passed by lawmakers in 2021.
- $218 million in state funds are budgeted for additional payments for community health service providers; combined with federal funding, the budget includes a total of $616 million for provider rate increases. The funding is meant to help service providers keep up with an acceleration in Maryland’s build-up to a $15 minimum wage, which will be proposed in the Moore administration’s Fair Wage Act.
- $33 million is budgeted for the Keep Our Heroes at Home Act, which would exempt a portion of military retirement income from taxation.
- $10 million is budgeted for the Innovation Economy Infrastructure Act, which would incentivize business creation and expansion.
Republican lawmakers on Friday expressed concern that Moore’s “fair wage” proposal would index the state’s minimum wage to inflation after it reached $15 in October.
“We think it will be a snowball effect,” said Del. Jefferson Ghrist (R-Upper Shore). “The highest cost of doing business is payroll. And if you increase payroll the only option business owners are going to have is to raise prices.”
The text of the bills to be introduced by the Moore administration were not immediately available Friday, and the governor’s office is expected to reveal more details about its legislative package in the next couple weeks.
Other budgetary efforts that Moore said would boost the state’s economy include a 13% increase in funding for state universities to $2.4 billion annually; record funding of $112 million for the Educational Excellence Awards program, the state’s largest need-based student aid program; a $38 million increase in formula funding for the state’s 15 community colleges; and $5 million for the Maryland Apprenticeship Training Program.
As the state faces a potential recession, the governor’s budget also includes funding to continue an extra $45 per month payment for Marylanders receiving Temporary Cash Assistance or Temporary Disability Assistance.
Rebuilding state government
Another top priority for Moore and Democratic leaders is “rebuilding state government.” Since 2013, Grady said, the number of positions budgeted for the executive branch has declined by 2,000 workers. At the same time, the vacancy rate for the spots that remained soared, to about 13.4%, or 6,500 vacant executive branch positions currently.
“We know that much of [the] structural surplus has been done on the backs of employees. And that has had consequences on communities,” said Moore.
The fiscal year 2023 budget includes funding to drop the vacancy rate by about half. Expansions of the Office of the Attorney General and Office of the Public Defender are among public safety priorities, as is more than $30 million to recruit and retain parole and probation officers, correctional officers and Department of Juvenile Services employees.
The budget would add 40 additional employees to help monitor firearm registration in the state.
New positions are also anticipated for state parks and at a new Water Supply Program to increase enforcement of drinking water standards.
Moore’s budget also includes $18 million, spread across the current fiscal year and the next, to establish a new Cabinet-level agency, the Department of Service and Civic Innovation.