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Baltimore County officials outline FY26 budget pressures and a $62 million gap at first town hall
Summary
County budget staff told residents the county faces an estimated $62 million shortfall for FY26 driven by fixed cost increases, federal and state revenue uncertainty, rising construction costs and other mandatory expenses; officials described a timeline for the executive budget and council review.
County budget staff told residents Wednesday evening that Baltimore County faces an estimated $62 million gap for fiscal year 2026 as the county builds its operating and capital budgets.
Kevin Reed, director of the Office of Budget and Finance, told the crowd at the Community College of Baltimore County's Catonsville campus that “what I wanted everyone to take away from tonight is uncertainty.” Reed outlined the county's two-part budget: a roughly $4.6 billion operating budget and a six-year, $3.13 billion capital program. He said about half of the operating budget is funded by the general fund and that roughly $400 million of county revenue comes from federal aid.
Reed said roughly 55% of local dollars go to public education (K–12, CCBC and libraries), while pensions, debt service and public safety are other large fixed-cost categories. He noted the county must maintain a minimum 10% rainy day fund and follow a spending affordability guideline set by the County Council. For FY25 that guideline set a growth rate of 4.36%, which Reed said equated to about $118 million in allowable ongoing growth.
On capital spending, Reed said about 46% of capital funding comes from water and sewer user fees and about 39% from revenue bonds, with approximately 7% from cash (PAYGO). He warned construction costs have risen—“about 20% increase in construction costs over the years”—which strains the capital program and can delay projects.
Reed also reviewed Baltimore County's American Rescue Plan Act (ARPA) allocation, saying the county received $161 million and has allocated 100% of those funds; he said the county now has two years left to spend them down after encumbrance. He described other pressures including a potential $20 million of state cost transfers tied to Maryland's budget gap, rising employee health insurance and property insurance costs, and uncertainty about federal employment levels that drive local wages.
After compiling agency requests, Reed said the county currently projects being about $62 million “over where we need to be,” meaning requests exceed revenues under current assumptions and the spending guideline. He said that figure could worsen if the state shifts additional costs to counties.
Reed outlined the near-term timeline: additional town halls in February and March, the county executive's formal budget presentation and state of the county on April 10, County Council review in April and May, and adoption of the FY26 budget in May with an effective date of July 1.
Residents at the meeting asked questions and submitted priorities on capital needs, school funding and public safety; county staff said they would continue to solicit public input ahead of the executive budget presentation.
A number of numbers Reed cited were presented as county staff estimates or policy parameters (for example, the 10% rainy day fund minimum and the 4.36% spending guideline for FY25). Reed characterized many items as subject to change pending state and federal actions.
