In Annapolis, Maryland, the state Senate has approved a series of budgetary measures aimed at offsetting a budget shortfall exceeding $3 billion. These measures incorporate increased taxes and reductions across various sectors of state government. Additionally, the budget outlines potential adjustments that could be required in response to potential federal budget cuts from the Trump administration.
The Democratic-majority legislature has broadly reached a consensus on the fiscal plan for the forthcoming year, following an agreement struck last month with Democratic Governor Wes Moore. The primary source of concern during the 90-day legislative session has been the significant downsizing anticipated within the federal government, potentially impacting a state heavily dependent on federal employment and contracts.
Provisions have been embedded in the budget measure to facilitate swift adjustments in the event of further federal cuts. Notably, it was decided that if federal funding to Maryland were reduced by $1 billion, the governor’s office would need to present a financial adjustment proposal to a legislative panel.
Democratic Senator James Rosapepe, representing a district near Washington, D.C., remarked, “Maryland is under attack from Washington,” highlighting the looming threat posed by anticipated cuts from figures such as Elon Musk and former President Trump. Moody’s rating agency has also underscored Maryland’s vulnerability due to potential shifts in federal priorities. The state is notably home to prominent federal agencies such as the National Institutes of Health and the National Security Agency.
Maryland recently learned that it might face a loss of over $400 million in federal educational funding. This follows the U.S. Department of Education’s decision to revoke prior COVID-19 recovery funding approvals. Preemptively, Maryland had already instituted $350 million in budget cuts due to preliminary concerns over economic downturns allegedly tied to the Trump era.
Rosapepe pointed out that the state is bracing for more cuts, yet remains uncertain about their timing and magnitude. Nonetheless, he emphasized that Maryland is prepared to counteract potential adverse impacts through investments in critical areas such as health care, education, public safety, and transportation.
Republican legislators, however, suggest that Maryland’s financial difficulties predate Trump’s presidency and are attributed primarily to overspending and dependency on federal assistance. Senate Minority Leader Steve Hershey commented that lawmakers were aware of these challenges early in the legislative session.
Hershey remarked that Maryland continues to enact policies that negatively impact state businesses, specifically criticizing a new 3% tax on IT services, which is part of the budget-balancing efforts. The fiscal strategy also introduces higher tax rates for individuals earning over $500,000 and $1 million annually, alongside a 2% capital gains tax for incomes exceeding $350,000. Moreover, tax increases on recreational cannabis and sports betting are also part of the plan.
Hershey asserted, “You cannot tax your way to prosperity,” opposing further tax increments. The budget plan involves over $2 billion in cuts across state government sectors, yet Republicans argue for stricter spending reductions to prevent tax hikes.
Discussions with the Maryland House are ongoing, as lawmakers aim to reconcile differences before casting a final vote on the $67 billion budget plan and associated legislation ahead of Monday’s midnight adjournment.