DBM faces scrutiny on collections, ARPA closeouts and DPA investments; administration defends priorities

The House Appropriations Committee heard a detailed fiscal 2026 review of the Department of Budget and Management's operating units and the State Reserve Fund, including DLS recommendations and DBM responses on collections, federal relief closeouts and a slate of dedicated purpose account (DPA) initiatives.

Jacob Cash, policy analyst for the Department of Legislative Services, told the committee the fiscal 2026 allowance for the DBM Office of the Secretary is $45 million, a 24 percent decline from fiscal 2025 levels driven primarily by a $15 million government-efficiency initiative that would fund consultant work by Boston Consulting Group under a pay-for-performance contract. Cash said the initiative would pay consultants up to $15 million if statewide savings reach $75 million.

Cash highlighted concerns about the Central Collections Unit (CCU), noting CCU collected a lower share of debts by value in fiscal 2024 (about 8 percent) than in prior years. DLS said CCU did not generate a net profit in fiscal 2024 and that the unit had undertaken cost-containment steps. DBM officials told the committee they are balancing investments in customer service with a return-to-profit objective and plan to add 15 contractual staff and website improvements to help debtors make payments.

Cash also briefed the committee on American Rescue Plan Act (ARPA) spending: DLS reported roughly $3.32 billion expended from fiscal 2021 to 2024 with about $330 million remaining to be expended; the largest remaining pot is $83 million for broadband. Cash said states must encumber remaining ARPA funds by Dec. 31, 2024 and expend them by Dec. 31, 2026; during questioning DBM stated it had obligated available funds ahead of the deadline.

The audit and finance compliance unit (AFCU) within DBM drew DLS scrutiny for lacking managing-for-results measures despite an expansion and rising repeat audit findings. DLS recommended restricting AFCU funds pending submission of fiscal 2025 performance goals, objectives and measures; DBM apologized for an oversight in submitting AFCU measures and said it would include them.

Cash told the committee late submission of budget amendments remains a problem. He noted several amendments in fiscal 2024 totaling $18 million were submitted late after the fiscal year closed and recommended tightening budget bill language to require submission by Oct. 31 of the following fiscal year.

DLS also flagged procurement delays and rising costs for a fleet maintenance and accident management contract, noting extension costs and increases of roughly 183 percent since the first extension; DLS asked DBM to provide more detail on causes and cost drivers.

Secretary Helene Grady and Deputy Secretary Mark Nicole responded for DBM. Grady said CCU is "duly focused on returning a net profit" while investing in customer service to process much higher referral volumes, including a renewed flow of E-ZPass debts from the Maryland Transportation Authority (MDTA). Grady described plans to add contractual call-center staff and website enhancements.

On ARPA, Grady said DBM has since reported that the remaining ARPA funds were obligated before the Dec. 31, 2024 encumbrance deadline. On AFCU, Grady said DBM collaborates with the Comptroller's Office and the recently launched Maryland Accounting Academy to improve training but respectfully does not accept sole responsibility for statewide audit findings. DBM agreed to provide AFCU performance measures and to consider other DLS technical recommendations.

Cash also presented the State Reserve Fund and DPA proposals. DLS described a proposed $419 million contingent appropriation to the rainy day fund in the BRFAA and recommended removing contingent language and directly making reductions; DLS also reviewed $180 million proposed from the Strategic Energy Investment Fund (SEIF) for climate pollution reduction initiatives, saying statute restricts some SEIF uses and recommending legislative authorization before spending.

DLS outlined multiple proposed DPA initiatives in the governor's plan, including funding for the Capital of Quantum initiative, a strategic infrastructure revolving loan fund, certified sites program, cyber workforce grants, and childcare capital. Cash recommended several reductions to reflect the state's fiscal condition. Grady defended those investments as necessary to support growth, workforce and competitiveness and said DBM disagrees with several proposed reductions and with limiting the secretary's authority to manage budget contingencies.

Committee members asked about collection fees on toll debt and whether fees and fines could substantially increase gross amounts owed; DBM said CCU statutory collection charges are 17 percent (statute allows up to 20 percent) and that staff will schedule follow-ups with MDTA and CCU leadership. On procurement delays DBM deferred to the Office of State Procurement for details.

DLS presented specific recommended actions and narrative requests; DBM agreed to some recommendations, disagreed with others and offered to work with the committee and the Comptroller's Office on implementation details. No formal committee votes were recorded in the hearing.