The Maryland Department of Legislative Services (DLS) sees short-term relief in Gov. Wes Moore’s recommended budget for next fiscal year, but Maryland’s structural deficit only continues to grow in fiscal year 28 and beyond.
DLS presented its first analysis of Moore’s budget to lawmakers on Monday, centering their focus on how the governor’s financial decisions resolve the state’s $1.5 billion cash shortfall for fiscal year 27.
Eighty percent of that shortfall figure is what’s known as a structural deficit, meaning ongoing state spending outpaces ongoing revenues at a rate of $1.2 billion.
DLS Fiscal and Policy Analyst David Romans commends Moore’s proposal for surpassing the department’s recommendation of shrinking that structural gap to $600 million.
In fact, DLS projections have Moore’s fiscal decisions reducing the structural deficit to less than $400 million.
While some proposed spending cuts are to thank for this reduction, Moore also utilized a lot of fund swapping and one-time transfers to close the gap, which Romans says isn’t as helpful for looming fiscal deficits.
“It improves the structural outlook, certainly for fiscal 27 and 28 as well,” Romans said. “However, it does not make substantial progress for fiscal 28 and beyond. So we still face very substantial and challenging shortfalls in the out years that will likely be left to the next term to try to resolve.”
Despite Moore presenting a balanced budget — a constitutional requirement —, the state is expected to face an even greater deficit of $2.3 billion in fiscal 28, which is expected to grow to over $4 billion by 2031.
DLS is also concerned that the administration may be underbudgeting in some spending categories, including Medicaid.
Romans says Moore’s funding for Medicaid and behavioral health services is coming in close to $170 million less than what DLS predicted in December, and he believes that could chalk up to figure discrepancies.
“There is not any major cost containment that explains that, so it basically is — the administration has a more favorable-to-the-state forecast. So we're a little concerned that there's some underfunding there, but we will be taking a deeper dive when we get to the behavioral health analysis,” Romans said.
One of Moore’s most significant proposed cuts is within the Developmental Disabilities Administration (DDA), which is projected to save the state around $150 million.
Similar cuts within DDA were proposed last year and were ultimately rejected.
Romans also told lawmakers he has concerns with continued federal funding and job cuts, the state’s Transportation Trust Fund taking a larger than anticipated hit and a lack of sustainable funding for Child Victims Act claims.
Lawmakers will spend the next two months reviewing Moore’s budget to determine what changes will be made.
