Slight revenue uptick does little to ease MD’s ‘extraordinary’ budget woes

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Maryland slightly increased its revenue projections for the current fiscal year and the next one, but the modest writeup doesn’t change the “extraordinary challenge” complicating the state’s spending plans, Budget Secretary Helene Grady said Thursday.

Officials are particularly wary of how expected federal workforce cuts under incoming President Donald Trump would hurt the tax revenue and economic growth in a state where hundreds of thousands of households report receiving federal wages each year.

State analysts increased their revenue projections for fiscal years 2025 and 2026 — which begins in July — by $262 million over their September forecast, in large part due to higher-than-expected wage growth.

The revenue forecast, though, was for the most part unchanged. Grady and her team won’t have added wiggle room as they prepare the governor’s budget proposal for release to the General Assembly in January.

“I can’t emphasize enough how significant the challenge is,” she said.

The state is facing a shortfall for its $63 billion budget that’s projected to reach $2.7 billion in fiscal 2026. Analysts have said that the deficit could be $5.9 billion in five years.

Maryland’s projected shortfall is the largest in at least 20 years, a period that includes the Great Recession.

Grady said the Moore administration has been warning of dismal fiscal projections since taking office in 2023 and has chipped away at the deficit while still building up the state’s rainy day fund.

Her comments came during a Thursday meeting of the state Board of Revenue Estimates, composed of the budget secretary, the comptroller and the treasurer. The board provides forecasts of the money coming in for Maryland’s general fund, which makes up roughly 40% of the state’s total revenue and includes money from taxes on personal income, corporate income and sales and use.

Another 40% comes from federal funding, and a combination of money from transportation, higher education and other state government funds make up the remaining 20%.

Board members on Thursday also spoke about the importance of the federal workforce for Maryland’s tax base and shared their concerns about the Trump administration’s stated plans to trim it.

“The risks ahead for Maryland’s economy during this period of federal transition overshadow what might otherwise be some reason for guarded optimism,” Grady said.

Maryland is home to numerous federal agencies and about 160,000 federal civilian jobs — compared to roughly 190,000 each in Washington, D.C., and Virginia — and scores of federal contractors.

Comptroller Brooke Lierman said the uncertainty about the future of the federal workforce and contracting jobs under Trump underscores the need for Maryland to grow its private sector.

Lierman said she was optimistic about Maryland’s economy, which hasn’t shown signs of entering a recession despite minimal growth, but she said the state is “navigating in a sea of uncertainty” as Trump prepares to take office.

“We cannot predict exactly what’s going to happen,” she said. “But we can predict that reductions of the federal workforce or major changes at the federal level could adversely impact Maryland’s revenues, especially if growth in the private sector remains slow.”