Maryland eyeing tapping reserves for deficit
3 min read
Martin Falbisoner
A negative budget projection by Maryland’s Department of Legislative Services has officials pondering tapping the state’s reserves to balance future budgets after spending off a current surplus.
“You have $695 million in deficiencies that need to be paid for in 2026, so that eats up the cash balance,” said David Romans the fiscal and policy coordinator for DLS.
“We actually assume you’d take a couple hundred million out of the rainy-day fund to cover the rest of those deficiencies.”
The comments came during a presentation to the Spending Affordability Committee of the General Assembly on Wednesday.
The distressing numbers come from a data-heavy, 71-page
In the report, DLS crunches numbers from Maryland’s Department of Transportation, debt service costs, state employment levels, the University System of Maryland’s financial condition, federal disaster aid, and the price of the state’s Blueprint education program.
The report posits the effects of diluting the state’s reserve funds from their current level of 8% to the statutory lower limit of 5%. The reduction equates to pulling $815 million from a reserve of $2.3 billion.
Per the report, “Applying cash balances from the Fiscal Stabilization Fund and Rainy-Day Fund while still leaving amount equal to 5% of General Fund Revenues would erase two-thirds of fiscal 2027 cash shortfall.”
The move could also further imperil the state’s bond rating with took a hit in
The DLS pins the bulk of the blame for the shortage on the tax cutting effects of the One Big Beautiful Bill Act.
Raising the deduction on state and local taxes computes out to $371 million revenue reduction combined with higher Medicaid costs of $217 million.
Republicans in the General Assembly point to another culprit.
“You can’t spend like there’s no tomorrow, and act surprised when the bill comes due,” said Senate Minority Leader Stephen Hershey.
“This administration and legislative Democrats have tied Maryland taxpayers to new, expensive, long-term programs like the multi-billion-dollar Blueprint for Education and the unchecked expansion of entitlement programs with no sustainable plan to pay for them.”
The report also explores the possibilities of decoupling from federal tax policy for OBBA provisions that fully expense research costs and production property along with changing the limitation on business interest expense deduction.
The report diverges from some of the data collected by the state’s Capital Debt Affordability Committee, over affordability ratios, valuing bond issuance, and debt service costs.
In October the CDAC
Maryland began the year with a $3.3 billion budget shortage that was solved through a combination of fund transfers, budget cuts, raising fees, and tax hikes.
The latest projections are subject to change and don’t include any effect from the record-breaking government shutdown.
New financial data from Board of Revenue Estimates will be reveled in December and next March.
