As the Maryland General Assembly prepares to convene for its annual 90-day session on March 15, 2024, lawmakers are focusing on two pressing issues: addressing a projected $1.5 billion budget deficit for fiscal year 2027 and ensuring the re-election of incumbents this fall. The urgency of these challenges is compounded by the state’s recent financial history, which included a $3 billion shortfall just a year ago.
Last year, a combination of tax increases and budget cuts temporarily balanced the budget. Yet, persistent inflation, significant job losses—recorded as the highest in the United States—and ongoing commitments to public education under the Blueprint for Maryland’s Future have left the state in a precarious position.
Financial Forecasts and Economic Outlook
Looking ahead, Governor Wes Moore has already indicated that there will be no major tax hikes during the upcoming session. This decision aligns with the political climate of an election year, where “affordability” is a central theme for both Democrats and Republicans. The challenge for lawmakers, including newly appointed House Speaker Joseline Peña-Melnyk, is to find viable solutions without compromising critical educational reforms.
The Board of Revenue Estimates has projected minimal job growth of just 0.1% in 2027 and 2028, down from an average of 2% in previous years. This stagnation raises concerns that without proactive measures, the projected shortfall could escalate to $2.7 billion by the following term and as high as $3.5 billion by fiscal year 2031.
Potential Solutions and Political Implications
One pressing question is whether Maryland can maintain its “Rainy Day” fund, which currently holds around $2 billion. Tapping into this reserve may seem tempting during a financial crisis, but doing so could jeopardize the state’s bond rating, which was downgraded by Moody’s from AAA to Aa1 last year, potentially increasing future borrowing costs.
Transportation funding also remains a significant concern. Previous increases in vehicle registration fees and other transportation-related charges have not sufficed to meet the needs of the state’s Transportation Trust Fund, which supports essential services, including road repairs and public transit. Further budget cuts in this area could disrupt daily commutes and worsen existing infrastructure issues.
For low-income households, the implications of this budget shortfall are particularly dire. Maryland will need to allocate an additional $59.6 million for the Supplemental Nutrition Assistance Program (SNAP) in fiscal year 2027, and $223.7 million by 2028, as the federal government imposes new work requirements for certain Medicaid recipients. The state’s ability to support these programs will be critical for vulnerable populations.
Lawmakers may also consider revising tax credits that disproportionately benefit wealthier corporations. Suggestions have included eliminating the long-criticized tax credit for film producers, which has been deemed ineffective in providing substantial long-term economic benefits. Additionally, the state’s new jobs tax credit, which has faced criticism for its complexity and low business participation, could also be on the chopping block.
As the state grapples with these financial challenges, it is essential for lawmakers to prioritize responsible fiscal policies. The decisions made over the next three months will significantly impact Maryland’s economic health and the well-being of its residents. Engaging in meaningful dialogue and finding common ground will be crucial as the General Assembly seeks to navigate this complex landscape.
