Analyst: Maryland FY26 capital plan larger than FY25 but relies on debt and one‑time revenues

Matthew Klein, the capital budget fiscal analyst, told the Capital Budget Subcommittee that the proposed fiscal 2026 capital program totals about $3,068,000,000, roughly $293,000,000 more than fiscal 2025.

Klein said the headline increase masks important financing changes: state fund sources, bond premiums, general obligation bond funds and recycled funds are “almost exactly on par” with FY25, while the Built to Learn issuance and other revenue‑stream accounting explain most of the year‑over‑year variation. “This is principally because the state's broadband initiative… expired in fiscal 2025,” Klein said, adding that federal funds are down from the prior year because some federally supported programs — funded through IIJA and ARPA — have ended.

Klein told the committee the administration plans roughly $1.7 billion in debt for the Built to Learn (often called “Bill to learn” in the briefing) revenue bonds and that the budget uses lottery‑backed financing and bond premiums in part to support the expansion. He said the governor's budget includes $145,000,000 of bond premiums (a $140,000,000 allocation for FY26 plus a $5,000,000 deficiency for FY25) and noted the treasurer’s practice of using bond premiums for debt service.

Why it matters: Klein said the state’s debt service remains below the 8% of revenue threshold used in the affordability framework, but rising debt service is “commensurate with the GO bond funds that are being authorized.” He observed that when rating agencies include lottery‑backed debt in their measures, the state’s debt picture looks larger than when the state excludes those liabilities.

Klein outlined other items the committee asked members to track: the proposed budget would meet the legislature’s $450,000,000 target for public school construction (about $444,000,000 in GO bonds plus roughly $9,000,000 in special funds), and it programs roughly $220,000,000 in transfer tax revenue for FY26. He also flagged that the proposed budget would not replace about $114,000,000 in the dedicated purpose account (DPA) and that the governor proposes reversing or transferring about $196,000,000 in prior general fund appropriations to shore up operating needs.

Klein said several projects were canceled or put on hold in the governor’s allowance: the new veterans home in Sykesville is “on hold” because the state has not received a federal award for the project; the budget no longer supports renovations to the William Donald Schaeffer Tower or the Nancy Grasmick building in Baltimore, with the administration preferring rental options and eventual divestment; and the budget proposes transfers from the DPA for other priorities.

On facility renewal, Klein said the official estimate of the facility renewal backlog was roughly $268,000,000, but after a newly reconstituted building assessment unit did more detailed work the backlog “is really more close to about $785,000,000.” He said the FY26 CIP increases facility renewal authorizations to about $375,000,000 over five years, compared with $130,000,000 in last year’s CIP.

The committee asked follow‑up questions about whether bond premiums were targeted to specific projects. Vice Chair Corey McCray asked whether the premiums “were identified for any particular things.” Klein replied that, other than a $5,000,000 deficiency intended to replace inadvertent reversions for the University of Maryland medical system, “there isn't any identification of project” and that premiums are treated as part of the capital budget to give the treasurer flexibility.

Klein concluded by urging the committee to watch federal funding flows and decisions about using bond proceeds versus general fund replacements as the session proceeds.