Governor Moore again warns of difficult budget decisions

Maryland Governor Wes Moore again warns of a dire financial situation for the state, but offered no concrete solutions in a speech to county representatives in Ocean City on Saturday.

Moore, a Democrat, touted his accomplishments in his first year and a half in office, including accelerating increases in the minimum wage, increasing child care benefits for working families and implementing a young adult services program. Those investments, he said, would pay off by boosting the economy and, in turn, state finances. But he said there is harder work ahead.

“I want to be clear: The next leg of this mission to address our budget problems will be more difficult than the last,” Moore said. “And right now, everything is on the table.”

Moore made the remarks at the conclusion of the Maryland Association of Counties' annual conference, which draws thousands of local and state politicians to the beach to discuss policy issues and also hosts an unofficial slate of political fundraisers and receptions.

Coming down from a “sugar high”

The crux of the state's budget problem is that projections show it will not raise enough money in the coming years — through taxes, fees and other sources — to fund state programs. The problem is exacerbated by the drying up of federal aid for the coronavirus pandemic at the same time as it implements an ambitious and expensive plan to improve public schools.

The $63 billion state budget had been artificially inflated in previous years by coronavirus aid, Moore said, taking a swipe at his predecessor, Republican Governor Larry Hogan, who had boasted about leaving office with a budget surplus. (Hogan is running for the U.S. Senate against Democrat Angela Alsobrooks, the chief administrative officer of Prince George's County and one of the governor's political allies.)

The COVID aid, Moore said, “is not a structural surplus. It is a sugar rush.”

In addition, the state lacks funds for planned transportation projects: gasoline taxes and other revenue sources do not raise enough money to finance the expansion of roads and bridges, not to mention the planned Red Line project in Baltimore.

If the problem is not resolved, the budget deficit would be in the billions of dollars. But the state is required to present a balanced budget each year, so the question is how to fix the deficit. The scale of the challenge will become clearer in late September, when a new round of fiscal projections is made.

When budget problems became apparent last year, Moore issued a similarly cautious warning at the same summer conference. In his subsequent budget, Moore made strategic cuts to government programs, which he called a “recalculation” of funding. In some cases, he reduced funding to pre-pandemic levels.

Then, after briefly tense negotiations, state lawmakers agreed to a series of targeted fee and tax increases. They increased vehicle registration and other fees, but refrained from raising taxes across the board.

Justify expenses

Moore gave only broad hints about his approach to the next budget, saying state agencies would have to provide evidence to support requests for new or increased spending.

“This administration does not rely on blind hope. We do not give blind hope. We rely on data,” Moore said.

Moore did not mention new or increased taxes or other ways to raise new money in his speech. However, he had told reporters a day earlier that the hurdle for raising money through taxes or fees was “extremely high.”

In his speech, Moore made it clear that he was not willing to scale back or fundamentally revise the plan to improve public education, known as the “Blueprint for Maryland's Future.”

The plan calls for the state and districts to put more money into concrete education measures, such as increasing teacher salaries, expanding preschool facilities, improving career and college preparatory programs, and offering community services at schools in high-needs and poverty-stricken areas.

“I am committed to implementing the plan for Maryland's future,” Moore said, calling it one of the “most inclusive” bills ever passed by the state legislature.

Still, laws – especially the most important and complex ones – often need to be adjusted, the governor said. Since the Blueprint plan was conceived in 2016 and approved in 2020, there have been changes in education and society that may require updating the programs.

“We have a unique opportunity to make Maryland a leading state in public education again. And I firmly believe we can seize that opportunity,” Moore said.

Difficult decisions lie ahead

State Senator Steve Hershey, the Senate's top Republican, said he was glad the governor did not mention tax increases, but welcomed the instruction to state agencies to justify their spending.

“He said the state needs to live within its means. That's something Republicans have been talking about for a long time,” said Hershey, who represents an East Coast district. “We'll have to see how that's implemented in detail.”

Montgomery County Democratic Executive Marc Elrich said he was pleased the bill was supported and perhaps even improved, but he would like to see the state overhaul the tax system to make it fairer while also raising money, particularly through corporate tax reform.

“Instead of looking at this with the attitude of, 'My God, we can't ask our citizens for more money,' maybe we should look to sources that other states use,” Elrich said.

Elrich favors a reform called “combined reporting,” which ensures that companies do not avoid taxes by shifting their income on paper to other states or companies. Elrich said the “allergy” to corporate tax reform is pointless.

“We are leaving millions, if not billions, of dollars on the table,” he said.

Moore will present his next budget in January; it will cover government spending for a 12-month period beginning July 1, 2025.