Moore says Maryland needs to account for the structural challenges facing the state’s economy and budget

Governor Wes Moore discusses the guiding principles his administration will lean on to improve a challenging economic landscape in Maryland on August 19, 2023. Photo: Daniel J. Brown

Citing concerns about Maryland’s future economic outlook, Gov. Wes Moore (D) made it clear to state and county officials Saturday that the next state budget could bring some tough fiscal decisions for them and for himself as governor.

„It’s going to take the discipline of elected officials in state and local government … yes, it’s going to take the discipline of the governor. As much as I want to say 'yes,’ you’re going to hear some 'no’s,'” he said at the Maryland Association of Counties summer meeting in Ocean City. Addressing the closing address of the conference, he told the assembled state and district leaders.

He did not go into detail about what the 'noes’ could mean – budget cuts, local plan vetoes or other options. Instead, he focused on mobilizing MACO participants to work together to help the state achieve its full economic potential.

Moore’s comments come a month after the Department of Legislative Services released a report detailing the state’s structural budget shortfalls since his first General Assembly session, when most of his legislative initiatives were passed by a Democratic majority in Annapolis.

The deficit projected in the report for 2028 exceeds $1 billion and access levels not seen since the Great Recession.

Most of the state’s annual budget is pre-set by previous legislative mandates, and top Moore officials recently noted that 17 of the past 20 budgets have required cuts to balance.

He argued that predictions of Maryland facing economic problems that have been predicted for years, including under then-Gov. Larry Hogan (R).

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„Since at least 2017, the Department of Legislative Services has been projecting structural budget deficits. Those projections were made under the last administration — not this one. Those are their numbers, not ours,” Moore said.

The governor did not mention that the influx of federal pandemic funding over the past three years has seen analysts forecast modest surpluses earlier this year. When Moore introduced his budget in January, legislative analysts projected hundreds of millions in structural surpluses — $232 million and $263 million — for the 2025 and 2026 fiscal years, respectively.

The 2025 fiscal year budget is now projected to begin with a deficit of $418 million.

But top Moore administration officials have stood by some pieces of legislation that have reduced future revenue projections, including a measure to improve existing tax credits for some military retirees, permanently extending the state’s Earned Income Tax Credit and accelerating the state minimum. Pay up to $15.

Those kinds of investments are critical to strengthening the competitiveness of the state’s economy and the financial well-being of families, top aides said.

Budget pressures ahead of the new governor, including the General Assembly’s push for a 10-year, multibillion-dollar education reform plan, have contributed to projected deficits, legislative analysts say.

Moore said Saturday that increased federal funding that has helped states weather the pandemic is expiring and contributing to the economic struggles Maryland is facing.

„The problems beneath the surface were masked by federal money and big stock gains during COVID,” he said. “Maryland and every other state in the country has benefited from billions of dollars in federal money to get us through the Covid emergency. Maryland and all other states have benefited from record highs in the stock market, bringing in tax revenue to keep budgets healthy. But we all know those days won’t last forever.

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He offered some silver linings to the uncertain state economic outlook, citing accomplishments he said would help propel the economy forward, including raising the minimum wage, investing in transportation infrastructure and keeping a $2.5 billion rainy day fund.

Moore and his top officials say the state has untapped potential to be one of the most educated and diverse states in the country, with resources like the Port of Baltimore and more than 70 federal laboratories.

By addressing broader economic conditions — the state’s economy grew at less than half the national pace over the past decade and Maryland’s population is growing more slowly than neighboring states — Moore said the state’s revenue situation could improve.

According to the administration, an improving economy is key to higher income and corporate tax revenue. By 2022, Maryland’s personal income will rise 1.3% and national wages will rise 2.4%. (Although the state has the highest median household income in the nation, according to the U.S. Census Bureau.)

During his closing remarks, Moore outlined a few guiding principles.

„We’re going to be careful. We’re going to be data-driven and we’re going to prioritize our spending to strengthen our economic engine. Not just for now, but for the future,” he said. „And discipline — discipline is going to be the thing that pushes us forward. A discipline to cooperate. Discipline to be innovative. The discipline of choosing the hard over the easy.

If Maryland can pull itself out of its economic stagnation, he said, neighboring states Virginia, New Jersey, Pennsylvania and Delaware „will see what we’ve done and envy our strength.”

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“It’s Maryland time. And our greatness will be won here, in this moment, together, in partnership,” Moore concluded.

Despite the uncertainty surrounding the state’s fiscal outlook, the chamber of MACo attendees gave the governor a standing ovation following his remarks.

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