Maryland lawmakers are set to tackle a significantly tougher budget challenge when they return to Annapolis, facing a $1.4 billion gap in the next state budget. New estimates show that economic woes and federal tax changes are cutting into state revenues more than expected, while costs for Medicaid, child care programs, and other services are rising.
In April, lawmakers anticipated a modest gap of around $200 million in the budget cycle starting from July 2026 to June 2027. However, with the passage of the “One Big Beautiful Bill Act” and corporate tax cuts, Maryland’s bottom line has taken a hit. The federal law also introduces new components of social safety net programs that will cost the state money to enforce.
Maryland is facing several cost overruns in various departments, including Medicaid, foster care facilities, and child care scholarship programs. The state is also struggling with a shortfall for its public education improvement program, the Blueprint for Maryland’s Future. Lawmakers have some options to balance the budget, such as reducing funds allocated to the Rainy Day Fund or tapping into the Fiscal Responsibility Fund.
There is no discussion of raising taxes or cutting spending, two unpopular options that lawmakers considered last year. The governor and lawmakers negotiated a deal that raised over $1.6 billion in taxes and fees, including a new 3% tax on data and information technology services. Lawmakers also cut back on planned spending.
With the election for governor and all 188 seats in the General Assembly approaching in 2026, it’s unlikely that lawmakers will consider raising taxes further. They will receive further economic forecasts in December and propose the next budget in January, after which they will pore over and tweak the spending plan during their 90-day session.
Source: https://www.thebanner.com/politics-power/state-government/maryland-state-budget-shortfall-ZKLQHPZNCZG3ZFTEOCHYOMKLCM