On Monday, the Department of Legislative Services presented a Fiscal Update to the House Appropriations Committee. The update noted that Maryland closed Fiscal Year 2025 with general fund revenues coming in about $521 million above projections, or roughly 2.1% more than expected. The surplus was driven by stronger-than-anticipated personal income tax collections, especially from non-wage income like capital gains, as well as higher wage withholding and unclaimed property revenues. However, some revenue streams, such as corporate income taxes and lottery sales, fell short of expectations. Of the extra funds, about $139 million went to the General Fund, $191 million was deposited into the state’s Rainy Day Fund, and another $191 million was allocated to the Fiscal Stabilization Fund for future education capital projects. These deposits strengthened Maryland’s reserves, leaving the state with a strong closing balance for FY2025.
Looking ahead, the fiscal outlook becomes more complicated. Changes under the One Big Beautiful Bill (“OBBB”) federal tax legislation, ongoing Medicaid costs, and other spending obligations could begin to erode the surplus by FY2027. While the Comptroller’s report projects revenue declines in Fiscal 2026 and 2027 tied to these factors, earlier estimates from the Department of Legislative Services were more optimistic, assuming some provisions would be extended. Even with the current healthy reserves, roughly $2.4 billion in the Rainy Day Fund, significant structural budget gaps could emerge by FY2028-2030 unless revenues outperform expectations or spending adjustments are made.
The meeting materials can be found here.
