DBM fiscal 2026 budget drops as $15M efficiency award, audits and procurement delays draw scrutiny

At a Budget and Taxation Committee hearing, Jacob Cash, a policy analyst with the Department of Legislative Services, presented the Department of Budget and Management—s fiscal 2026 operating allowance and performance review, saying the DBM Office of the Secretary—s allowance is roughly $45,000,000, a 24% decline from 2025 largely driven by a $15,000,000 line item for a government-efficiency initiative managed through a pay-for-performance contract with Boston Consulting Group.

The decline matters because the $15 million represents the maximum award to the consultant if the initiative produces $75,000,000 in statewide savings, and DLS told the committee that the budget language request would allow DBM to budget across-the-board savings without identifying the affected agencies and programs. DLS recommended limiting that exception to fiscal 2026; DBM said it concurs with limiting the exception to one year but defended budgeting the statewide savings within DBM until the agency-level breakdown is available.

Cash summarized the proposal and performance material: the DBM allowance covers central budget functions, capital budgeting and collections; the Central Collections Unit (CCU) did not generate a net profit in fiscal 2024, and the CCU—s revenue and expense trends show only a modest increase in collections and costs. Cash also highlighted DBM—s reporting on the state vehicle fleet goal, saying the state met its target in fiscal 2024 by purchasing 90 zero-emission vehicles, representing 27% of available purchases.

DBM Secretary Helene Grady told the committee the CCU is "duly focused on returning a net profit while also enhancing our customer service levels" and described recent increases in collection placement volumes after MDTA resumed referrals. Grady said DBM plans to add contractual staff and website improvements to reduce wait times and facilitate payments. CCU Director Anthony Ortoni Fugate told the committee, "As I understand the question are we using AI today? The answer to that is no, we're not using AI, but we are looking at AI." Fugate added that AI solutions are resource intensive.

DLS—s presentation raised multiple accounting and closeout concerns identified by the Office of Legislative Audits and other reviews. Cash summarized potential liabilities and errors reported by agencies: Maryland Department of Health reported possible general-fund liabilities of about $273,600,000 related mainly to Medicaid reimbursements; the Department of Human Services failed to report $26,000,000 in potential liabilities and incorrectly reverted $64,300,000 at the end of fiscal 2024; and several agencies had unreconciled accrued federal revenues and clearing account deficits. DLS said those issues produced a series of deficiency appropriations totaling hundreds of millions of dollars for prior-year shortfalls.

DLS recommended that DBM submit a report on steps to improve recruitment, training and retention of fiscal staff and requested that DBM provide stronger closeout oversight. DBM responded that it collaborates with the Comptroller—s Office and agencies and that the Comptroller—s newly launched Maryland Accounting Academy and DBM—s Audit, Finance and Compliance Unit (AFCU) will play roles in improving training and guidance. Grady said DBM does not accept responsibility for overseeing accounting functions across all agencies but will continue to collaborate and support those efforts.

Cash also flagged remaining American Rescue Plan Act funds: the DBM appendix shows about $3,320,000,000 expended from FY2021—FY2024 and roughly $330,000,000 unexpended as of the report, with the largest remaining allocation for broadband expansion (about $83,000,000). Grady told the committee that DBM has obligated the available ARPA funds ahead of the December 31 deadline.

DLS raised procurement and timing concerns as well. The contract that manages state vehicle maintenance, held by Element Fleet Management, has been subject to repeated delays; DLS reported a November 2024 contract extension with a $14,000,000 ceiling for three months and said daily costs had increased about 83% since October 2021. DBM clarified that the Office of State Procurement within the Department of General Services administers that procurement and that the $14,000,000 is a ceiling amount the state pays only if services are provided.

On the BRFAA budget language, Grady explained that the administration—s government modernization initiative with BCG began in late 2024 and that DBM based its $50,000,000 general-fund savings estimate on preliminary sizing work with the consultant and agency staff. "We would not have built that into the budget if we didn't have that confidence," she said, while agreeing with DLS that any exception to the specificity requirement should be limited to fiscal 2026.

DLS offered a series of recommended budget actions and reporting requirements; DBM indicated concurrence with several recommendations and respectful disagreement with others (notably the recommendation to make DBM the responsible party for agency accounting closeouts and a proposed limitation on the secretary's authority to transfer certain statewide allocations). No formal committee votes were recorded on the record presented at the hearing.

The topic threaded multiple committee questions about verification of projected savings, procurement delays, staffing and use of technology in collections, with committee members urging DBM and CCU to return with more detail on AI and timeline projections as the efficiency initiative proceeds.

Looking ahead, DLS asked the Budget and Taxation Committee to adopt language limiting the BRFAA exception to FY2026 and to seek additional reports on AFCU performance metrics, agency closeout training, and procurement cost escalation. DBM said it will provide additional detail and continue collaboration with the Comptroller—s Office and agencies.