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Baltimore County officials outline tight FY26 budget as revenues and borrowing strain planning
Summary
County Executive Kathy Klausmeier and budget director Kevin Reed told District 4 residents that Baltimore County faces a roughly $62 million gap in projected FY26 funding, constrained borrowing capacity and possible state cost shifts that will force difficult choices when the executive submits a balanced budget.
County Executive Kathy Klausmeier and Kevin Reed, director of Baltimore County’s Office of Budget and Finance, told residents at a District 4 budget town hall that the county must submit a balanced fiscal 2026 budget amid rising costs and constrained revenue.
Klausmeier and Reed laid out the budget “pie” and described several pressures shaping the FY26 plan, including increased labor and materials costs for capital projects, a prospective state action to shift teacher pension costs to local governments, and uncertainty in federal aid. Reed said federal aid is about 9% of the county’s revenues — “about $400,000,000” — and that county staff are meeting weekly to pursue reimbursements tied to grants.
Reed gave the scale of the county’s finances and the coming shortfall: the operating budget is roughly $4.6 billion and the five‑year capital program is about $3.1 billion. He said the county’s current total funding requests for FY26 amount to about $190,000,000 while available revenue and spending affordability guidelines currently cover roughly $127,000,000 — “about a $62,000,000 gap that we’re gonna have to close to submit a balanced budget to the county council.”
Reed described limits on borrowing and said the county “has reached the maximum borrowing limits that we have available to us,” noting prior referenda increased capacity but that cash usage (PAYGO) is preferred where possible. He said the county was recently reaffirmed with AAA bond ratings and a stable outlook by the three major rating agencies, which helps keep borrowing costs low.
On timeline, Reed said the county executive will submit her budget on Friday, April 11; the County Council will review it in April and May and hold public hearings before final action, and the next fiscal year begins July 1.
Why it matters: officials framed the presentation as a call for resident input while warning that state and federal changes and inflation will force trade‑offs. Reed urged attendees to prioritize services as staff draft the FY26 submission.
Quotations in context: County Executive Kathy Klausmeier said the county is “entering into uncertain times” and described a need to “present a balanced budget and continue investing in our county’s future.” Reed cautioned about future pension costs and state shortfalls, saying the state’s structural deficit “is passing on a cost to localities… about $20,000,000” for Baltimore County under current proposals.
The town hall format: after the presentation, residents had 90 seconds each to speak to budget priorities; department directors were present to follow up on requests.
Details and clarifications: Reed said half of operating revenues come from real property and income taxes, pensions and debt service consume a sizable share of the budget, and about a quarter of capital spending goes to schools. He noted the county fully obligated $161,000,000 in American Rescue Plan (ARP) funds and must spend those ARP obligations within two years by law.
Ending: Reed and Klausmeier invited written comments to supplement the town hall and reminded residents of the council review and public hearing timeline before the July 1 start of FY26.
