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Maryland’s budget basics
According to the National Association of State Budget Officers (NASBO), Maryland’s total expenditures in fiscal year (FY) 2020 were $48.3 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.
Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.
Per the US Census Bureau, Maryland’s combined state and local direct general expenditures were $61.9 billion in FY 2018 (the most recent year census data were available), or $10,261 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.
Maryland’s largest spending areas per capita were elementary and secondary education ($2,332) and public welfare ($2,186). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.
Maryland’s combined state and local general revenues were $64.8 billion in FY 2018, or $10,743 per capita. National per capita general revenues were $10,071. Maryland uses all major state and local taxes. Maryland’s largest sources of per capita revenue were individual income taxes ($2,470) and federal transfers ($2,330).
Governor Larry Hogan, a Republican, was elected in 2018 with 55 percent of the vote. The next gubernatorial election is in 2022.
Maryland has a divided government. Democrats control both the House of Delegates (99 Democrats to 42 Republicans) and Senate (32 Democrats to 15 Republicans), with veto-proof majorities in both houses. The entire legislature is up for election in 2022 because both delegates and senators serve four-year terms.
Maryland’s budget institutions, rules, and constraints
Maryland uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. While the General Assembly recommends a spending limit to the governor, there are no enforced tax and expenditure limits. There are, however, limits on total authorized debt and debt service incurred by the state.
(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)
Maryland’s recent fiscal debates
- In 2016, the Maryland legislature created the Commission on Innovation and Excellence in Education. Better known as the Kirwan Commission (named after its chair), the commission was charged with improving the Maryland K–12 education system. The commission’s recommendations included expanded prekindergarten, more career training, and higher pay; altogether, the recommendations comprised $4 billion more in annual state and local education funding. In 2019, the legislature enacted some of the commission’s recommendations and approved hundreds of millions more in education spending. Governor Hogan allowed the legislation to pass into law without his signature but expressed concern that there was no dedicated funding source for the initiatives. Hogan has pledged not to raise taxes to fund the commission’s recommended education spending increases.
- The Maryland legislature increased the state’s minimum wage in 2019. The legislation, which passed despite the governor’s veto, schedules annual increases in the state’s minimum wage that will take it from $10.10 an hour in 2019 to $15 in 2025. Companies with fewer than 15 employees will pay a slightly different minimum wage over the period and not pay $15 an hour until 2026. Employers with workers younger than 18 can pay those workers 85 percent of the minimum wage.
- In 2018, the Maryland legislature dedicated $167 million in funding for the Washington Metropolitan Area Transit Authority (Metro). The legislation was part of a joint effort with the District of Columbia and Virginia to improve the Washington, DC, region’s Metro system with dedicated funding for capital improvements. However, Governor Hogan’s administration also proposed a 10 percent cut in transit funding over the next six years. If enacted, these cuts would not affect the dedicated funding for Metro but could significantly affect transit plans in Baltimore.
Maryland’s current budget
Governor Hogan released his FY 2021 budget proposal in January 2020. The proposal included $19.8 billion in general-fund spending, a 1 percent increase from FY 2020. The governor’s budget prioritized education and economic development programs. In March, Governor Hogan released a supplemental budget request, which included $10 million to address the COVID-19 response.
Maryland enacted its FY 2021 budget in March 2020. The enacted budget included $19.7 billion in general-fund spending, a $100 million decrease from the governor’s proposal but a slight increase over FY 2020 spending. Following the enacted budget and a decline in projected revenue, Governor Hogan proposed $413 million in reductions for all funds, including $395 million cut from general funds. The state’s Board of Public Works approved these cuts in July.
Governor Hogan released his proposed FY 2022 budget in January 2021 and gave his State of the State address in February. The governor’s speech emphasized his commitment to not raising taxes; he also proposed more than $1 billion in tax cuts for retired Marylanders. His budget proposal included $20.1 billion in general-fund spending and $49.4 billion in total expenditures. In February 2020, Governor Hogan and the legislature agreed on a $1.2 billion pandemic relief bill. The enacted legislation provided one-time payments ($300 for individuals and $500 for couples) for residents who claimed the state’s earned income tax credit on their 2019 taxes, increased the state’s earned income tax credit match from 28 percent to 45 percent (and 100 percent for childless workers), made unemployment benefits received in 2020 and 2021 not taxable, and provided tax credits to businesses.
For more on Maryland’s budget, see
Maryland’s economic trends
Maryland’s per capita income (per the Bureau of Economic Analysis) was $68,258 in 2020, ranking seventh among the states. It was above the national average of $59,729, but below the Mideast regional average of $70,876. The state’s median household income (five-year estimate) was $84,805 in 2019, ranking first among the states and above the national average of $62,843. Maryland’s poverty rate was 9.2 percent in 2019 (five-year estimate), below the national rate of 13.4 percent.
Although Maryland’s averages tell a story about the entire state, Maryland is composed of diverse localities. For example, the city of Hagerstown’s median household income was $40,800, and its poverty rate was 25.7 percent; the city of Bowie’s median household income was $113,338, and its poverty rate was 3.2 percent.
Maryland’s unemployment rate has historically been below the national average. (See how COVID-19 is affecting state employment and earnings data.)
Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Maryland, the average unemployment rate in 2020 was 5.6 percent for white residents, 8.1 percent for Black residents, and 6.2 percent for Latino residents.