DLS briefing: Eastern Shore to see larger state education aid but counties face cost shifts in governor's proposal

Annapolis, Feb. 7 — Department of Legislative Services analysts told the Eastern Shore delegation on Friday that state aid for fiscal 2026 would increase overall for the region but that the governor's budget proposes shifts that would raise costs for county governments.

Valerie Monroe, an analyst with the Department of Legislative Services (DLS), said the nine Eastern Shore counties together would receive about $900 million in state aid in FY26, with roughly $826 million going directly to local governments and about $77 million in retirement payments. DLS said that represents about a $48 million increase over the prior year in the totals presented to the delegation.

The briefing emphasized a split picture for local revenue. "Local property tax revenue is driven primarily by growth in the property tax base," Monroe said, pointing to county-by-county differences: Queen Anne's, Talbot and Worcester counties have the highest per-capita assessable bases, while Somerset and several others have much lower bases. DLS noted Talbot County's increase in its real property tax rate produced an average annual property-tax revenue rise of 11.4% over a two-year period, well above the statewide average of 5.2%.

Why it matters: DLS told the delegation that most of the large increase in state support is directed to public schools. The nine local school systems on the Eastern Shore would receive about $675 million in direct education aid in FY26, an increase of roughly $35 million from the prior year. DLS also highlighted that four counties'Caroline, Dorchester, Somerset and Wicomico'qualify for disparity grants because of lower per-capita net taxable income.

Discussion and key details

Hiram, a DLS presenter who led the state aid segment, flagged proposals in the governor's budget that would reduce some statewide spending and shift certain costs to local governments. DLS's materials show a proposed $262 million reduction in state aid overall; combining that with other proposals produces a total fiscal impact of about $283 million statewide with roughly $143 million of cost shifts to local governments that would be borne by counties and municipalities.

DLS gave specific examples the delegation raised: under the governor's proposal the state's share of property-assessment costs would fall from 50% to 10%, with local governments picking up the remainder; DLS estimated that change would increase local costs by about $20 million statewide. DLS also said the proposal would move a larger share of teacher and community-college retirement costs onto counties; for example, Caroline County's share of teachers' retirement costs would rise by about $509,000 and community-college retirement by about $52,000 in the DLS estimate presented.

DLS also briefed members on targeted grants and formulas. Police aid is allocated largely by population density but includes a municipal sworn-officer component (about 4.4% of the formula statewide) that is significant for some Eastern Shore municipalities; Worcester County, for instance, receives roughly 42% of its police aid through the municipal sworn-officer count. Fire-and-rescue aid was raised by legislation in 2024 to $16.5 million statewide, and most Eastern Shore counties benefit from a minimum 2% share of that program.

Questions from members

Delegates pressed DLS on local examples. Delegate Kevin Jacobs (Kent County) asked why Kent ranks third-highest in wealth on a per-capita basis while showing high free-and-reduced-meal rates; DLS responded that the agency measures "local wealth" by the tax base (per-capita net taxable income and property base) rather than median household income, and noted Kent's small share of residents attending public schools increases per-pupil funding on a per-pupil basis.

Delegate Elliot Harburger asked when DLS would update the presentation to reflect possible changes to the teacher-retirement cost shift; DLS said it would follow up and provide more precise numbers. Delegate Sample Hughes pressed about special-education funding and was told the governor's proposed reductions do not cut funding for special education in the major K-12 formulas, although nonpublic-placement costs could shift to local districts in a limited way; DLS noted those nonpublic-placement shifts appeared small for most Eastern Shore systems in the FY26 projection.

Bottom line

DLS advised the delegation that while total state aid to Eastern Shore counties increases in the FY26 budget presentation, several proposed changes would transfer identifiable costs to county and municipal governments, particularly property-assessment costs and portions of retirement funding. DLS emphasized that many of the figures it presented reflect the governor's introduced budget and could change during the legislative appropriation process.

Sources: statements and slides presented by Department of Legislative Services staff to the Eastern Shore delegation on Feb. 7, 2025; DLS county revenue outlook and state-aid exhibits (materials on the DLS website).