DLS staff: Maryland's FY27 budget narrows shortfall but leaves large out-year gaps
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Summary
Legislative analysts told the Budget and Taxation Committee the governor's FY27 plan produces a $108 million general fund balance and $2.2 billion in reserves while closing most of the FY27 structural gap, but forecasts show multibillion-dollar shortfalls in later years that will require future action.
The Budget and Taxation Committee received an overview of the governor's proposed fiscal 2027 budget, which the Department of Legislative Services staff said improves the short-term outlook but does not resolve long-term structural shortfalls.
David Romans told the committee the total fund budget is roughly $70.7 billion, about $500 million higher than the governor's FY26 plan, and that the FY27 plan leaves an estimated $108 million general fund balance and $2.2 billion in the rainy day fund (about 8% of general fund revenues). He said the structural gap for FY27 falls from the December projection of $1.2 billion to about $394 million, calling that "substantial progress," but cautioned serious shortfalls remain in later years, reaching several billion dollars by 2031.
The analysis presented three primary paths by which the governor's plan reaches balance in FY27: revenue adjustments, transfers, and spending reductions. Romans highlighted an item correcting an overallocation to a local income tax reserve account and described roughly $1.5 billion of proposed actions that require legislative approval to produce the FY27 surplus.
Romans also flagged several spending-reduction areas and fund swaps that contribute to balance. He identified nearly $600 million in transfers, including about $259 million drawn from the Strategic Energy Investment Fund to provide budget relief, and described multiple special-fund swaps that substitute bond proceeds or special funds for general funds in the capital program.
On programmatic risk, Romans noted the governor's forecast assumes lower Medicaid behavioral-health costs than DLS had expected; DLS will review whether behavioral-health programs are adequately funded. He also warned that the Blueprint fund for K–12 implementation has a limited fund balance that supports FY27 but would require roughly $1.7 billion from the general fund in FY28 and grow thereafter if no other revenue source is identified.
The presentation closed with a caution that several contingent reductions and expanded uses of special funds are necessary to reach the projected balances, and that out-year pressures remain large enough that the next term will face difficult choices.
The committee asked staff to provide additional local-impact numbers requested by members; no formal votes were taken during the briefing.