Baltimore County outlines FY26 budget gap, warns of rising mandatory costs and limited borrowing capacity

County Executive Kathy Klausmeier and Kevin Reed, director of budget and finance, laid out Baltimore County's fiscal constraints and timeline for the fiscal year 2026 budget during a District 7 town hall at Solars Pointe Multipurpose Center.

Klausmeier said county leaders must "be prepared to make tough decisions in this uncertain climate" as the executive prepares a budget to submit to the County Council in April. Reed gave a line-by-line view of revenues and spending pressures, telling attendees the county estimates about $127 million in general fund growth for FY26 but has received roughly $189 million in new requests from agencies, including mandated increases.

The presentation said the county's operating budget is about $4.6 billion and that more than half of local revenue is allocated to Baltimore County Public Schools. Federal funding accounts for roughly $400 million to the county, the public school system and the Community College of Baltimore County, Reed said. The six-year capital program totals about $3.13 billion; roughly half of capital funding comes from user fees for water and sewer, with general obligation bonds making up nearly 40 percent of capital revenue.

Reed recapped American Rescue Plan Act funding the county received: $161 million in ARPA funds were fully obligated and booked as of Dec. 30, 2024, but projects still must be built out and spent down over the next two years. He also listed other pressures: state budget uncertainty, teacher and community college pension costs that may be shifted to counties, double-digit annual health-care cost increases for employees and retirees, and capital inflation that has pushed construction and materials costs higher since 2016.

On borrowing, Reed said the county has reached or approached its maximum borrowing limits for general obligation bonds. Maintaining the county's triple-A bond rating, reaffirmed recently, remains a priority because it lowers borrowing costs, he said.

Reed outlined the FY26 calendar: the county executive's proposed budget will be submitted to the County Council on April 11; the council will hold agency hearings and make adjustments in April and May; and the council is scheduled to adopt the budget in May with the fiscal year beginning July 1.

Why it matters: the presentation framed a narrow set of choices as county leaders craft a balanced budget under the spending affordability guideline set by the County Council's spending affordability committee. Officials signaled they will seek program and operational changes to close the gap while protecting the county's fiscal ratings.

The county accepted public testimony at the event and urged residents with additional priorities to submit them by email to townhall@baltimorecountymd.gov.