Gov. Wes Moore’s first budget proposal was presented to lawmakers in Annapolis on Friday. Photo by Danielle E Gaines.
Gov. Wes Moore (D) on Friday unveiled his first state budget, a $63.1 billion spending plan that includes increases for education and transportation programs, no new taxes, and a series of legislative initiatives designed to create a “more competitive and… fairer economy” should create the state.
While lawmakers were still sifting through details on Friday, the plan was widely praised by Democrats in the General Assembly.
“Overall, I think it was very much a shared values budget,” said Sen. Bill Ferguson (D-Baltimore City).
“It recognizes the shared priorities of the Legislature and the Governor in a way that we haven’t seen in recent years,” Del said. Ben Barnes (D-Prince George’s), chairman of the House Appropriations Committee, which will move the budget bill first in this legislature.
Moore also used the budget announcement to focus on some of his administration’s overarching priorities, including growing Maryland’s economy to make it more competitive with surrounding states.
Moore reiterated his campaign position that Maryland was an “asset rich and strategy poor” state.
Treasury Secretary Helene Grady said Maryland’s gross domestic product has grown 11% over the past decade, according to the US Bureau of Economic Analysis, while the national economy has grown 23%.
Moore said the state has specific ways to boost the economy by expanding the science and technology services sector, investing in education, and passing other targeted legislation to improve economic outcomes for individual Marylanders.
Grady said the government’s focus on economic growth “underpins our ability to make progress on all other priorities.”
The proposed budget lowers the state’s rainy day fund to the legally recommended rate of 10% of general fund income, or $2.5 billion, and projects a general fund balance of $820 million at the end of the fiscal year.
Both balances are lower than the $5.2 billion forecast at the end of this current fiscal year.
Some Republican lawmakers have expressed concern about the long-term viability of the spending plan.
“I would hope that, to the greatest extent possible, these historic budget surpluses would be skewed to government savings accounts or used for a proper middle-class tax cut for hard-working Maryland families so both can prepare for a possible economic downturn,” House Das shared with the minority leader Jason Buckel (R-Allegany) in a statement. “It’s not enough to tout the lack of tax increases in a fiscal year when spending levels will require tax increases later. It’s important to be principled and disciplined now so we don’t burden our taxpayers later.”
Moore administration officials stressed that the governor’s budget “deliberately and strategically” reduces the surplus and is in balance for the next five fiscal years.
Moore officials said a strong national economy in the previous two fiscal years, as well as federal stimulus programs, had resulted in a cash windfall for the state — but a sharp break with tougher economic conditions means they should tread cautiously.
“There are very real economic headwinds that we face. So we’re going to be careful, we’re going to be responsible, but we’re also going to approach the big things that we have to accomplish with a real sense of hope and ambition,” Moore said.
Efforts to stimulate the economy
Two of Moore’s top priorities in spending 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 savings account dedicated to decades of education reform. He will also allocate $500 million to new transportation projects to get people “from where they live to where there is opportunity.” Moore declined to specify which projects would be funded, saying he wanted those decisions to rest with his new transport secretary, who would be appointed “very soon”.
In addition to efforts to invest strategically, Moore said he hopes the transportation push will be complemented by additional federal funding.
Investing in the Blueprint could help prevent this fund from being depleted within the next five years. While the education fund is expected to have a balance of $2.2 billion at the end of Moore’s fiscal 2024 budget, the fund would have a near-zero balance in 2026 and is projected to be overstretched in 2027.
Moore said the half-billion payment this year was a “down payment” to show his administration supports the reform effort. Asked whether new taxes or fees will be needed to prop up the fund going forward, Moore said it’s important his administration and lawmakers, along with local governments, start discussions now about the fund’s long-term sustainability while it lasts he one has excess.
A key revenue stream for the Education Reform Fund — a nation’s first tax on digital ad sales — has faced legal challenges since it was passed in 2021.
The outlook for the Blueprint fund only recently turned negative when December 1 state public school enrollment counts showed an unexpected increase in the number of students qualifying for free and discounted school meals. So-called FARMS students are a key driver in the state’s new education funding formula, which provides more state funding for schools with higher concentrations of poverty.
The half-billion-dollar Blueprint payment is in addition to the state’s $8.8 billion in full funding for its public schools, a 10% increase year-to-date.
The proposed education budget also includes $15 million for an incentive to hire new teachers, which will be part of the Maryland Educator Shortage Act.
The Moore administration will also introduce at least four budget-related bills designed to build a “competitive and equitable economy”:
- $171 million is earmarked for the Family Prosperity Act, which would allow for a permanent expansion of the Earned Income Tax Credit passed by Legislature in 2021.
- $218 million in federal funds earmarked for additional payments to community health service providers; Combined with federal funding, the budget totals $616 million for vendor price increases. The funding is intended to help service providers keep pace with accelerating Maryland’s build-up to a $15 minimum wage proposed under the Moore administration’s Fair Wage Act.
- $33 million is earmarked for the Keep Our Heroes at Home Act, which would exempt some of the military’s retirement income from taxation.
- $10 million is earmarked for the Innovation Economy Infrastructure Act, which would provide incentives for business creation and expansion.
Republican lawmakers on Friday expressed concern that Moore’s “fair wage” proposal would adjust the state’s minimum wage for inflation after it hit $15 in October.
“We think it’s going to be a snowball effect,” Del said. Jefferson Ghrist (R-Upper Shore). “The highest cost of doing business is the labor cost. And if you raise labor costs, the only option for business owners is to raise prices.”
The text of the bills to be introduced by the Moore administration was not immediately available as of Friday, and the governor’s office is expected to announce more details on its bill package in the coming weeks.
Other budgetary efforts that Moore said would boost the state’s economy include a 13 percent increase in funding for state universities to $2.4 billion annually; Record $112 million in funding for the Educational Excellence Awards program, the state’s largest need-based student assistance 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 funds to continue an additional $45 monthly payment for Marylanders who are on Temporary Cash Assistance or Temporary Disability Assistance.
reorganize state government
Another top priority for Moore and the Democratic leaders is “rebuilding state government.” Since 2013, Grady said, the number of jobs budgeted for the executive branch has decreased by 2,000 employees. At the same time, the vacancy rate for the remaining posts rose to about 13.4%, or currently 6,500 vacancies in the executive branch.
“We know that much [the] Structural overtime was done at the expense of workers. And that had implications for communities,” Moore said.
The budget for the 2023 financial year provides funds to reduce the vacancy rate by around half. Expansion of the Attorney General’s Office and Office of the Public Defender are among public safety priorities, as are more than $30 million toward recruiting and retaining probation and probation officers, correctional officers and youth welfare workers.
The budget would add 40 additional employees to help oversee the state’s firearms registry.
New jobs are also expected for state parks and a new water supply program to improve enforcement of drinking water standards.
Moore’s budget also includes $18 million that will be spread over the current fiscal year and next to establish a new Cabinet-level agency, the Department of Service and Civic Innovation.
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