Maryland officials outline funding shifts for Chesapeake Bay restoration, roll out Whole Watershed grants and LEAF farmer program

State officials told the Transportation and Environment Subcommittee on Feb. 3 that Maryland has made measureable progress toward Chesapeake Bay restoration but faces shifting funding needs as the state moves past the 2025 agreement and targets new “whole watershed” projects.

The Department of Natural Resources and other agencies described a funding shift from failing wastewater plants to agricultural sources after recent repairs to Back River and Patapsco plants reduced wastewater nutrient loads. Andrew Gray, the Department of Legislative Services analyst, told the panel that Maryland’s portion of restoration funding appears to decline about $83 million between fiscal 2025 working appropriations and the fiscal 2026 allowance, “primarily due to purple line activities in the Maryland Department of Transportation,” and that the state has moved some administrative costs onto trust fund balances.

DLS and agency witnesses said the state will use multiple funding streams — including the Chesapeake and Atlantic Coastal Bays 2010 Trust Fund, the Bay Restoration Fund and the waterway improvement fund — to seed a Whole Watershed Act pilot that will direct about $5 million from the 2010 trust fund plus $5 million from the Bay Restoration Fund and $1.5 million from the waterway improvement fund to five watershed projects statewide. Suzanne Dorsey, Deputy Secretary at the Maryland Department of the Environment, said the program is structured to “hand‑hold for five years to make sure we get the work done” and that the administration received nine applications to the request for proposals and will select five projects on March 31.

Why it matters: the Chesapeake restoration program is at a programmatic turning point as the 2025 agreement expires. Officials told lawmakers they are shifting emphasis toward living habitats, land conservation and targeted, bundled projects that combine multiple practices to improve outcomes and leverage other funds.

Details from the briefing and analysis

- Targets and outcomes: Gray summarized the framework that guides restoration — the total maximum daily load (TMDL), state watershed implementation plans, and two‑year milestones — and highlighted modeling from the Chesapeake Assessment and Scenario Tool for targeting investments. He said monitoring and modeling show improvements in some measures but continued problems with temperature, chlorophyll a and clarity at some stations.

- Sector shifts: Gray and agency witnesses noted that the wastewater sector had been the largest remaining source of nitrogen because of poor performance at Back River and Patapsco but that performance at those plants has improved. That improvement shifts more of the remaining load reductions to agriculture, particularly on the Eastern Shore.

- Whole Watershed Act and RFPs: DLS described the Whole Watershed Act funding mix and recommended that DNR and partner agencies report in the fiscal 2027 allowance on how those funds are spent. Dorsey and DNR staff described the program as using competitive RFPs focused on strong local partnerships; nine applications arrived and five watersheds will be selected March 31. Agencies described the goal of using bundled projects and “pay for performance” approaches to draw private and philanthropic leverage.

- Trust fund pressures: Gray and agency witnesses said the Chesapeake and Atlantic Coastal Bays 2010 Trust Fund is being used in part to defray administrative and operating expenses (an $8 million increase of trust‑funded operating costs was noted). DLS requested that the administration outline a long‑term plan for the 2010 trust fund and adopt narrative explaining that plan in the DNR budget materials.

- Conowingo/Conowingo dam and water‑quality certification: Gray flagged unresolved issues around the Conowingo/Conowingo dam watersheds and relicensing. He said the Federal Energy Regulatory Commission issued a rule on Nov. 21, 2024, that generally expects water‑quality certification actions to complete within a year; Maryland’s process has taken longer and DLS asked the administration to explain whether that timing could affect a roughly $200 million agreement with Exelon intended for watershed work. Dorsey said MDE is negotiating with the dam’s licensees and mediation has been “productive.”

- Oyster aquaculture credits and living resources: Gray and DNR witnesses discussed new oyster aquaculture water‑quality credits as a potential source of nutrient reductions and private‑sector engagement.

- LEAF program for agriculture: Kevin Addicks, Secretary of the Maryland Department of Agriculture, described the Maryland Leadership and Environmentally Engaged Farming (LEAF) program, proposed in the administration’s omnibus package (Senate Bill 428, House Bill 506). The fiscal 2026 allowance includes $900,000 for LEAF to create incentives and advisory services to reward high‑performing farmers and encourage adoption of conservation and community practices. Addicks compared LEAF to a LEED‑type rating for farms and described incentives and outreach elements.

- Funding tension for LEAF: DLS and agency witnesses noted a discrepancy between the governor’s budget appropriation for LEAF ($900,000) and language in the budget reconciliation and financing act that would reduce Tree Solutions Now Act funding available to agriculture from $2.5 million to $500,000. Addicks said LEAF is intended to be supported by a mix of the governor’s appropriation, Tree Solutions Now funds indicated in the Bay Legacy Act, and other sources; he acknowledged uncertainty until reconciliation is final and asked the committee for clarity.

What the agencies will do next: agency witnesses agreed to provide the panel a long‑term plan for the 2010 trust fund and to report in the fiscal 2027 allowance on Whole Watershed pilot outcomes. DLS recommended adoption of narrative language requiring that reporting.

Ending: Lawmakers pressed for further detail on long‑term trust fund solvency and on the LEAF funding picture. Agencies said they will return with additional information in narrative and in the fiscal 2027 materials and that the first Whole Watershed project awards will be announced March 31.