State Budget Impacts
Breaking Down the Governor’s Proposal
Maryland’s budget process is complex, often contentious, and challenging to follow. Each year, the Governor submits a proposed budget to the General Assembly. The House and Senate then review, modify, and ultimately approve the budget. Maryland’s Constitution mandates a balanced budget annually. While the General Assembly has broad authority over the process, it can adjust almost any aspect of the Governor’s proposal. However, the Governor can veto increases in certain spending categories, though the General Assembly can override a veto with enough votes.
In analyzing this year’s budget, I consulted multiple sources, including reports from the Maryland Association of Counties (MACO) and the Department of Legislative Services (DLS), as well as the budget bills themselves, to assess their impact on St. Mary’s County.
Summary
Maryland faces a substantial $3 billion budget shortfall this year, with projections indicating further deficits in the coming years. Governor Moore’s $67 billion budget aims to reduce the structural deficit, maintain reserves, and balance targeted investments with cost-cutting measures. However, the budget also reduces grant and aid programs that counties rely on and shifts millions of dollars in expenses to local governments.
Key budget highlights include:
from DLS Fiscal Brief
Overall spending increase: 1.2% ($793 million) over last year.
Education: $543 million increase for the Blueprint for Education, funded by a dedicated account for the next few years.
Transportation: $343 million increase.
Green Initiatives: Nearly $90 million allocated.
Higher Education: $160 million increase for tuition, fees, and grants.
Local Government Aid: $599 million increase.
These expenses are funded by $206 million in tax or fee increases, along with cuts and delays in Blueprint funding requirements. However, for FY26, spending will exceed revenues by $186 million, and by FY30, the deficit will still stand at $3.4 billion, half of the projected $6 billion shortfall.
Tax and Revenue Changes
To generate additional revenue, the Governor proposes several tax and fee adjustments:
from DLS Fiscal Brief
Delivery Tax: A $0.75 fee on delivery services (excluding food) would generate $225 million annually through FY30. If enacted, it would be the highest delivery tax in the nation.
Vehicle Emissions Fees: Increasing the emissions inspection fee from $14 to $30 and the late fee from $15 to $30 would raise $140 million annually.
Corporate Tax: The rate would decrease from 8.25% to 7.99%, while a new combined reporting requirement would close loopholes allowing businesses to avoid Maryland taxes.
Estate and Inheritance Tax: The budget eliminates the inheritance tax but lowers the estate tax exemption from $5 million to $2 million, generating additional revenue.
Gambling and Cannabis Taxes: Sports betting taxes would rise from 15% to 30%, table games from 20% to 25%, and cannabis taxes would increase to 15% by FY27, netting $137 million.
Income Tax Adjustments:
from DLS Fiscal Brief
Six out of 10 income brackets would see increases.
Individuals earning between $150,000 and $600,000 would see no change.
Those earning between $3,000 and $150,000 would see a 0.05% tax reduction.
Those earning less than $3,000 would experience a tax increase.
The standard deduction for single filers would rise from $2,250 to $5,600, and for joint filers from $4,500 to $11,200, but itemized deductions would be eliminated.
These changes would generate $691.5 million in additional revenue, with a capital gains surcharge adding another $128 million.
Key Concerns from the DLS Report
The DLS report identifies several significant budget challenges:
from DLS Fiscal Brief
Blueprint for Education: This initiative accounts for three-quarters of the projected structural deficit by FY30, requiring long-term financial solutions.
Child Victims Act of 2023: This law allows survivors of sexual abuse to sue the State without a statute of limitations. With 3,500 claims already filed and a $890,000 per-claim liability cap, the financial impact could be substantial, yet no funds are allocated for these payouts.
Developmental Disabilities Administration Cuts: The budget reduces funding by $97 million this year and by $235 million in FY26.
Public Opinion
According to a Washington Post-University of Maryland poll:
Opposed: 74% disapprove of cutting $200 million in developmental disability support, and the $0.75 delivery tax is widely unpopular.
Supported: 60% approve of increasing gambling and cannabis taxes, while 59% favor raising income taxes on those earning $500,000 or more.
Poll Demographics:
22% from Western/Southern Maryland or the Eastern Shore
52% Democrats, 24% Republicans, 24% Independents or other
Full poll results: Washington Post Poll
Impact on St. Mary’s County
Increased Costs:
Education pension/retirement costs rise by $1.56 million.
Funding Increases:
$3.77 million for local bridge and road maintenance (+$428K).
$1.71 million for public safety (+$34K).
$4.11 million for the St. Mary’s Health Department (+$273K).
Total FY26 State Aid: $184.3 million (+2.4%), ranking 20th out of 24 jurisdictions, with approximately $1,600 in state aid per resident.
Breakdown of FY26 State Funding:
$149.5 million to St. Mary’s County Public Schools
$18 million for retirement benefits
$6.2 million to the College of Southern Maryland
$5.5 million for Leonardtown
$4.07 million for the Health Department
$975K to St. Mary’s County Public Library
All of these numbers are still proposed and subject to change. The General Assembly will amend the budget throughout the session, with final approval required before April.
DLS Fiscal Briefing: https://mgaleg.maryland.gov/meeting_material/2025/app%20-%20133818705908235122%20-%20Fiscal_Briefing_2025.pdf
