Maryland Gov. Wes Moore unveils $63.1B budget with increases for child care, juvenile services and no new taxes

Gov. Wes Moore unveiled a $63.1 billion state budget plan Wednesday that he said would not require new taxes — despite a growing budget deficit and billions of dollars owed for future policies — and that would still increase spending on child care programs, efforts to help juveniles in the justice system and construction on the FBI’s new headquarters in Prince George’s County.

The Democratic governor’s proposal, which requires approval from the Maryland General Assembly in the coming months, would use a variety of methods to resolve a roughly $1.1 billion cash shortfall while raising spending on his top policy plans for the fiscal year beginning in July.

Among those, he said, is $270 million in additional funding for the Maryland State Department of Education’s child care scholarship program, where high demand has required additional funds. The budget also includes $500 million more for schools, $100 million for the FBI building in Greenbelt that federal officials approved last year and $16 million more for the Department of Juvenile Services as the agency faces public scrutiny over its rehabilitation programs.

Moore also reiterated his intention to restore $150 million in planned cuts to transportation programs next year.

Those and other funding increases are possible because of plans to pull from the state’s rainy day fund, borrow more than previous years, shift money around and reevaluate funding for programs and funding formulas. Officials said the trims are spread out across government agencies and were necessary to avoid raising taxes at a time when some lawmakers say the state must soon begin looking for major sources of new revenue — including possibly raising taxes on the rich or corporations.

“Drafting this budget wasn’t easy,” Moore said Wednesday in Annapolis. “It was hard. We were operating under very tight constraints, very tight realities.”

That financial reality is a far cry from one year ago, when Moore was inaugurated and quickly introduced a budget that started with a surplus and the last remnants of pandemic-era federal funding that kept Maryland’s and many other states’ budgets flush in recent years.

Those funds dried up as Moore and the Democratic supermajorities in the legislature last year passed a $63.1 billion budget that made the first major investment in the state’s education reform plan — a $900 million infusion for the Blueprint for Maryland’s Future — and saved $2.5 billion in the rainy day fund. Moore’s first-year agenda also had a cost, with tax credits for low-income families adding nearly $200 million to the state’s bottom line, for example.

The governor had stressed fiscal discipline leading up to Wednesday’s announcement. He described the savings found in the budget as a “rebasing,” a process that budget officials said included reducing or slowing increases for programs that had seen a significant boost with the influx of federal pandemic funds.

For example, a formula that provides a subsidy for private higher education institutions has allowed the subsidy to increase quickly every year, from $59 million in the 2020 fiscal year to $137 million in the current 2024 fiscal year. The proposed 2025 budget would lower the figure to just under $134 million.

“There is a rebasing that we have on a few different state programs that we think are still showing our measurement of being aggressive yet at the same time dealing with current economic [conditions],” Moore said.

Larger fixes were recommended by the legislature’s Spending Affordability Committee last month and accepted by the Moore administration.

Those include borrowing an additional $500 million to pay for capital projects — increasing the general obligation bond debt to $1.75 billion — and dipping into the rainy day fund to restore $150 million after the Maryland Department of Transportation last month announced $3.3 billion in reduced spending on the state’s six-year transportation plan. The restorations were only made for the next fiscal year as lawmakers look to remake the state’s transportation funding system.

The rainy day fund balance, if legislators don’t seek to tap into it further, would remain at $2.34 billion, or 9.4% of general fund revenues. That rate was another recommendation of the Spending Affordability Committee that Moore’s administration followed, in addition to the overall goal of reducing the $761 million structural deficit by a third.

Separate from the state’s cash deficit, the structural deficit is an indicator of how expenditures are outpacing revenues, and it’s set to increase to $2.7 billion in the 2029 fiscal year if further adjustments aren’t made.

That deficit does not include expenses for other progressive policies around education, climate and transportation that Moore and other Democrats support but have not found revenue for. The Blueprint, the long-term education plan, is the state’s largest future cost driver and is funded only through the 2027 fiscal year. Moore said a $500 million increase in the state’s education budget in 2025 will cover current Blueprint costs and bring total K-12 public school funding to $9.2 billion.

The governor did not propose any solutions for the longer multi-year issues — and House and Senate budget negotiators are showing signs of disagreement over how aggressively to pursue them this year.

House Appropriations Chair Del. Ben Barnes, a Prince George’s County Democrat who is his chamber’s top budget negotiator, said each side shares the same values and he believes they will come together to work on solutions. But the lack of any plans for long-term Blueprint or transportation funding are a concern.

“That gives me pause — spending on new programs while we haven’t figured out how to pay for all the great programs we have on the books,” Barnes said, declining to single-out any new programs before his committee’s budget hearings get underway.

Senate President Bill Ferguson, meanwhile, said the Senate would not likely consider new major sources of revenue, like taxes, in the current annual 90-day session. He said in an interview Wednesday that Moore’s budget plan was a decent starting point and a way of “picking specific priorities and doing what we can with what we have.”

“That’s an important value for us moving forward,” said Ferguson, a Baltimore Democrat.

Republicans in the minority of both chambers also warned about future costs but said it was a “relief” that the budget would spend less than the current year (total spending for the 2024 budget grew slightly to about $64 billion) and that it does not include taxes.

“Long-term, spending is still outpacing revenues and this budget does not identify a solution to this ongoing dilemma,” said Sen. Paul Corderman, a Washington County Republican on the Senate Budget and Taxation Committee. “We must address these expensive mandates from the past and refrain from adding new ones that will further weigh down the budget.”

Republicans also celebrated the $9 million maintained for the private school scholarship program, known as BOOST, for low-income families. Moore proposed reducing that fund last year, setting off a battle against Republicans and Senate Democrats who wanted to keep the program fully intact.

The child care scholarship program, meanwhile, will receive both $270 million in the 2025 budget and another $218 million in the current 2024 budget — necessities because it was underfunded in recent years and because it quickly grew as policymakers made tweaks, according to state budget documents. More than 21,000 families received subsidies to cover most of the cost of child care in the 2023 fiscal year, an increase of nearly 40% over the prior year, according to the documents.

The increase for the program in Baltimore was far greater, at about 300%, said Del. Stephanie Smith, a Baltimore Democrat who’s welcoming the investments but is concerned about a cost-saving measure in the program that went unmentioned by Moore on Wednesday.

According to a notice from the Maryland State Education Department, some scholarship recipients will be required to begin paying higher co-pays, which to-date had been just a few dollars. The rate, like the subsidy itself, is based on income level, with the lowest earners not being required to pay.

Smith said that could mean $100 to $300 per week for “the most vulnerable working families in the state.” Preventing the change would require legislation and finding around $25 million in funding, she said. She did not say specifically if legislation was in the works but said the Maryland Legislative Black Caucus, of which she is a member, would “stand in opposition” to the move when it announces its legislative priorities Thursday.

“Any conversations about revenue should be really sensitive to putting any additional pressures on families that qualify for child care assistance,” Smith said.

Moore also highlighted investments in public safety, a topic that he and other lawmakers say will be a primary focus this year.

Local police will receive $5 million more, for a total of $127 million, in state aid. A new gun violence prevention center within the Department of Health will receive $10 million to launch efforts that include data collection and analysis.

Within the Department of Juvenile Services, $4.4 million more is being allocated for the Thrive Academy, which launched last year to target supports and interventions for young people at risk of being involved in gun violence. Another $12 million increase will go toward the department’s efforts to serve the majority of young people who come into contact with it but are not eligible for other programs, including those who are diverted from prosecution and cannot be referred to the delinquency system under current law, according to budget documents.

Other investments announced Wednesday include $115 million more for housing and community development projects, $6 million for Baltimore’s Tech Hub Consortium and $13 million more for the Department of Service and Civic Innovation, which Moore created last year to launch his signature service year program for recent high school graduates. The $100 million for the FBI headquarters, meanwhile, was previously authorized by state lawmakers and was contingent on the General Services Administration’s selection of the Greenbelt site in the prolonged fight with Virginia over winning the bid. Moore said the event headquarters will generate 7,500 jobs and $4 billion in economic activity.

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