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Gov. Wes Moore proposes targeted cuts and investments with no new taxes

After warning for months that Maryland needed to rein in its costs and boost its economy, Gov. Wes Moore (D) on Wednesday released a $63.1 billion budget proposal that aims to do that without raising taxes.

His budget, the first one created exclusively by his administration, significantly trims spending on transportation, private universities and community colleges, among many other smaller cuts, while plowing hundreds of millions of dollars into his other priorities.

Moore called the spending plan the first step in “rebasing” how the government invests in core priorities and lives within its means.

“I’m new to politics, but I’m not new to budgets,” Moore, a former investment banker, said. “If you are the CEO of a company and your business is not growing, then maybe it is time to rethink your business model. It will not be enough to simply rebuild the state government. We need to refocus.”

Moore said his administration went line by line through the state’s budget, looking for ways to align state spending with what works and looking for places pandemic aid inflated state spending. Among the examples his administration offered: cutting aid for private colleges such as Johns Hopkins University back to pre-pandemic levels.

Maryland faced budget gaps projected to widen from $761 million next fiscal year to $2.7 billion four years later. The cuts shrink those gaps but did not close them, and Moore said the state cannot pursue bigger ambitions unless Maryland’s economy grows to support them. At a time when other states’ economies grew by 7.5 percent on average over the past five years, he noted Maryland’s grew by merely 0.2 percent.

Among his spending priorities to boost the economy, Moore proposed another $100 million to build a new FBI headquarters, money to bolster a new technology hub in Baltimore and incentives to increase affordable housing.

“It’s not just about cuts. We’ve got to get this economy going,” Moore said during a Wednesday morning news conference in Annapolis where he set out four goals for the next year: to make Maryland safer, more economically competitive and more affordable, and to have a higher share of residents doing public service. To that last point, he included cash to expand his signature Service Year Option program, alongside the Maryland Corps program, to allow for 500 participants, up from the inaugural year’s 280.

He’s also proposed expanding a pilot program to rehabilitate juvenile offenders along with other investments into the Department of Juvenile Services, saying, “I believe in accountability and I believe in consequences for people that break the law. But if we put children into a system that makes them more likely to commit crime, we’re doing it wrong.”

Maryland launches nation’s first state-backed service year program

The budget proposal is subject to General Assembly approval and is 2 percent smaller than the current fiscal year, which was swollen by the last of federal pandemic aid.

The budget continues to pour billions into a growing public education plan meant to boost teacher pay, provide universal pre-K and flood high-poverty schools with resources, among many other goals. It also includes raises for state workers, which were negotiated in advance with the state’s unions.

He’s also proposed investments in job training and “cutting red tape” for certain industries, such as datacenters.

State lawmakers have considerable power in shaping the state’s spending plan and offered mixed initial reviews on Wednesday, with Republicans concerned about undisclosed fee increases hitting Maryland residents.

“While it is a relief that the Governor’s budget spends less than last year and does not raise taxes, the number of fee increases proposed by his Administration through legislation and the regulatory process is concerning,” Senate Minority Leader Stephen S. Hershey Jr. (R-Queen Anne’s) said in a statement. “Taxes aren’t the only way to raise revenue, and state government should not be in the business of nickel and diming Maryland’s families and small businesses.”

One of those fee increases drew raised eyebrows from Democrats, who hold supermajorities in both chambers. Under his budget, a program that gives free child care to everyone that qualifies would instead implement a co-pay, asking families to pay up to 7 percent of their income toward the cost of care.

Moore emphasized record investment in a child-care subsidy program during his remarks. It has seen dramatic growth since a 2022 reform increased eligibility requirements from $40,000 to $90,000 for a family of four, and forbid the state from creating a waiting list for the program. Moore highlighted both the record amount going to the program and a recent report from the state comptroller that showed women dropping out of the workforce amid high child-care expenses.

“The cost of child care is too high. It changes the trajectory of our state’s fiscal health,” he said.

But his budget also saves $24 million by requiring new families to pay a co-pay, based on a sliding scale.

“That’s problematic,” said House Appropriations Chair Ben Barnes (D-Prince George’s) who described the budget overall as having “some good things.”

He said he was concerned about ways the governor moved around money to fund new programs without fully addressing the long-term shortfalls ahead. Within four years, the annual gap between revenue and expenses is expected to balloon to $2.7 billion within four years. “The current budget doesn’t reflect long-term solutions,” he said. “I’m confident by the end of the session we will find some.”

Maryland’s budget woes mirror states across the country. A Pew report earlier this month that found “roughly half of Americans live in states that report short-term budget gaps, potential long-term deficits, or both.”

Budget analysts were poring over the details Wednesday to understand the impacts of the governor’s plan.

Moore has been warning Maryland leaders about needing “discipline” ahead since August, and in December proposed $3.3 billion in transportation cuts over the next six years, eliminating projects across the state and curtailing transit service and litter pickup to deal with a lack of cash generated by the state’s gas tax. On Tuesday, he announced he could stave off $250 million worth of near-term cuts this year using some of the $2.5 billion in the state’s rainy day fund.

The move heads off what local and state leaders viewed as the worst of the $312 million in cuts expected to take effect this year.

Some Democrats have floated ideas to raise taxes to help close the budget gap, though there is no consensus on a plan.

Senate Budget and Taxation Chair Guy Guzzone (D-Howard) called Moore’s budget “a great foundation” and said he thought an important step is to “take the time to review very carefully all segments of the budget to make sure those are right-sized.” But he also said the legislature is looking closely at how to implement a long-term plan that pays for the education program, known as the Blueprint for Maryland’s Future, that is a primary driver of future budget shortfalls.

“This is an opportunity to do something very important for the future of our kids,” he said. “We want to live up to that commitment, so we will take that role very seriously.”

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