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Maryland Environmental Service posts small operating loss in FY24 but seeks $219.4 million FY26 allowance and statutory cap changes for contingency funds
Summary
DLS outlined MES’s audited fiscal 2024 results and the agency’s non‑budgeted fiscal 2026 operating plan; MES reported $30.7 million in net assets and about $219.4 million proposed operating allowance for FY26, while DLS recommended continued annual funding statements and noted contingency fund cap increases proposed in BRFAA.
The subcommittee heard the Department of Legislative Services analysis and Maryland Environmental Service (MES) leadership testimony on MES’s fiscal 2026 operating data, audited financial statements and project portfolio.
Steve Quist of DLS summarized MES’s fiscal 2024 audited results: MES reported roughly $30,700,000 in total net position and a negative operating income of approximately $833,000 despite a year‑over‑year revenue increase of about $19.3 million. DLS noted MES receives roughly 95% of its revenue from fee‑for‑service projects performed for state and local governments and that the largest growth in FY24 was in environmental engineering and dredging/restoration work.
DLS described MES’s fiscal 2026 operating allowance of roughly $219,400,000 (an increase of $10,400,000 from fiscal 2025), driven largely by salary and fringe increases and higher operating costs tied to goods and utilities. MES told the committee that staffing is managed flexibly; MES’s FY26 allowance supports about 785 regular full‑time equivalent positions, and the agency’s vacancy rate remains below target at roughly 3.2%.
DLS also reviewed MES’s reserve and contingency funds. MES maintains several project reserve funds used to retain contingency for changing project scope and cost. Two statutory caps govern these containments: the state reimbursable project contingency fund (current cap $1,000,000) and the ECI steam turbine contingency fund (current cap $1,500,000). The executive BRFAA proposal would raise the caps to $3,000,000 and $5,000,000 respectively; DLS presented the statutory context and recommended the subcommittee consider the proposal.
MES director Dr. Charles Glass told members the agency concurs with the DLS recommendation that MES provide an annual MES funding statement and highlighted recent workforce and recruitment efforts, including an internship program and a new rotational fellowship; Glass noted strong applicant interest for engineering positions. Glass also said MES continues to convert contractual positions as project needs change and properly oversees statutory retainage and withdrawals from project contingency funds with Department of Budget and Management approvals.
Why this matters: MES performs fee‑for‑service environmental projects statewide (dredging, water/wastewater operations, recycling and environmental engineering). The agency’s operating health, reserve levels and statutory caps affect MES’s ability to proceed on multi‑year reimbursable projects for state agencies and local governments.
DLS recommended annual funding‑statement reporting language and the committee accepted MES’s concurrence with that recommendation; MES committed to continue providing the requested information to the subcommittee.
Provenance: DLS presentation and MES testimony were confined to the MES segment of the hearing, beginning with DLS’s financial summary and ending after MES director remarks and committee recognition.
