Agency analysts: civil-division grants drop $25.8 million in fiscal 2026

Yashoda Rai, a legislative analyst, told the Appropriations Committee that the fiscal 2026 allowance for payments to civil divisions falls by $25,800,000 after accounting for contingent reductions in the Budget Reconciliation and Financing Act (BARFA) of 2025.

Rai said the appropriation bundle covers three items: disparity grants for lower‑wealth counties set by statute, grants to offset local assumption of a portion of teacher retirement costs, and gaming grants to Calvert County. The net $25.8 million decrease includes an $11.9 million net decline in disparity grants and a $13.8 million reduction in the teacher retirement supplemental grant appropriation that is contingent on enactment of BARFA.

The analysis shows disparities shift among counties: Somerset, Washington and Wicomico counties would receive increases in disparity grants in fiscal 2026, while Caroline, Dorchester, Garrett and Prince George’s counties would see declines after the contingent reduction. Rai noted the total fiscal 2026 disparity grant pool falls to about $177 million from roughly $188 million in fiscal 2025. She also summarized how counties with per‑capita local tax revenues below 75% of the statewide average are eligible for disparity grants, subject to a soft cap tied to each county’s 2010 grant amount and tax rate.

Rai described how recently adopted graduated county income tax brackets — established by chapter 23 of the 2021 special session — require calculating an effective gross tax rate for jurisdictions that use graduated brackets; the effective gross tax rates reported for tax year 2023 were 2.76% for Anne Arundel County and 2.9% for Frederick County. The DLS analyst recommended concurring with the governor’s allowance for this program.

The Department of Budget and Management (DBM) officials present told the committee they had no additions to the DLS presentation and were available to answer questions.