Maryland lawmakers are facing $2.7 billion budget deficit, their worst in two decades
BALTIMORE -- Maryland lawmakers face a budget outlook worse than during the Great Recession in 2008-2009, with a $2.7B budget deficit for the next budget year, which begins July 1, 2025.
A five-year budget outlook was presented to lawmakers at a Spending Affordability Committee briefing on Tuesday. It shows the state has enough revenue to cover only 84% of expenses expected to be incurred through the 2030 fiscal year. It's the largest gap seen in the last 20 years.
David Romans, an analyst for the Department of Legislative Services, called it "an enormous gap."
Forecasted revenues typically going into a session can cover around 93% or 94% of the cost. In 2022, there was a surplus of revenue, but the last time there was a significant gap was in 2008 (89%) and 2009 (87%). Now, the projections are worse, at 84%.
Biggest spending factors
The biggest factor driving up spending is Blueprint for Maryland's Future, the state's public school reform plan.
Romans said higher costs of Medicaid and demand for the state's childcare subsidy program are also leading to spending growth that's faster than the revenue.
Economy in a stagnant period
Maryland's economy has been in a stagnant period. Fiscal analysts said it's growing, but very slowly. Spending is projected to grow 6% a year over the next five years while revenues are projected to grow only 3%.
Maryland's job growth rate
While the state has a low unemployment rate of 2.7% year-to-date, Maryland has the second-worst job growth rate in the country, behind Oregon, said Theresa Tuszynski, another analyst.
In the state, employment growth year-to-date was up 0.2%, but the private sector lost jobs. When excluding state, local, and federal government jobs, the private sector lost about 5,900 jobs. It was a percentage change of negative 0.3% year-to-date, said Tuszynski.
Election's impact on economy
The budget outlook did not factor in any potential cutback of federal funds. Analysts warned the results of the election could present a concern for Maryland's economy.
President-elect Donald Trump announced Tuesday a new temporary agency known as the Department of Government Efficiency. He said in a statement that the heads of the department "will pave the way for my Administration to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies - Essential to the 'Save America' Movement."
"There's been much discussion about reductions in the federal workforce, or relocation of the federal agencies outside of the Greater Washington Region which obviously would be harmful to the Maryland economy," Romans said. He also warned there's a risk of some federal cutbacks in aid going to state and local government.
"We don't have a very strong growth in our economy. We don't have a lot of cushion to absorb any major cutbacks in either the federal workforce or federal contract spending," Tuszynski said.