Maryland Gov. Wes Moore is proposing mid-year cuts to eliminate nearly $150 million worth of planned spending as financial pressures mount on the state budget.

The cuts are necessary, according to Moore’s team, to keep the state’s $63 billion budget in balance. The savings will be earmarked to eventually help cover increased costs for child care assistance and the Medicaid health insurance program.

More Marylanders than expected are enrolling in Medicaid, as well as the Child Care Scholarship Program, which helps defray the cost of day care for working families. The Moore administration doesn’t have a full picture of what the increased costs will be, but the participation rates are increasing quickly enough that officials wanted to start acting immediately.

The cuts span nearly all of state government, from disaster recovery to neighborhood revitalization programs to local law enforcement grants and funding for local health departments.

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A senior Moore administration official told reporters Wednesday that the cuts are “surgical and strategic” in order to have the least impact on Marylanders. In some cases, the cuts will mean delayed hiring or not increasing spending as much as planned “until we get our arms around” the needed increases for Medicaid and child care assistance.

While the governor proposes the state budget and it is approved by state lawmakers, the governor can request limited midyear changes by going through the Board of Public Works, a three-member panel that has the final say on state contracts and spending. The governor is one of three members of the board.

The maximum cut allowed is 25% to any program or department, and the vote is scheduled for next week.

The last time a Maryland governor put forward midyear cuts was in 2020 during the early months of the coronavirus pandemic that initially put a strain on state resources. Then-Gov. Larry Hogan, a Republican, proposed $672 million in cuts, and settled on $413 million in cuts approved by the Board of Public Works.

In a column published in The Baltimore Sun on Wednesday morning, Moore described his plan as one that will make “targeted and strategic spending cuts and grow our economy while simultaneously protecting the programs and projects that Marylanders care about most.”

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The Democratic governor is currently in Idaho for the Sun Valley Conference, an event dubbed as “billionaires summer camp,” where he is doing political work. The governor is conducting business for the Democratic Governors Association and, as a surrogate for President Joe Biden’s reelection effort, he’s likely working to bolster the prospects of the struggling campaign.

Governor Wes Moore, center, Treasurer Dereck Davis, left, and Comptroller Brooke Lierman, right, have the first annual meeting of the Maryland Board of Public Works at the Maryland State House on January 25, 2023.
Treasurer Dereck Davis, Gov. Wes Moore and Comptroller Brooke Lierman are the three members of the Maryland Board of Public Works who will vote next week on budget cuts. (Kaitlin Newman/The Baltimore Banner)

There are two other members of the Board of Public Works, both Democrats. Treasurer Dereck Davis declined to comment through a spokesperson. In a statement, Comptroller Brooke Lierman said she’d wait to comment on her vote during the next meeting, but pointed to her inaugural State of the Economy report which highlighted child care as “one of the key barriers forcing people from the workforce and negatively impacting the state’s labor participation rate.”

While the Board of Public Works can approve cutting money from the budget, it can’t be moved over to the health and child care programs until January, when the General Assembly is next in session.

Growing needs for health care, child care

The Moore administration anticipated both programs would have increased participation, but enrollment has boomed more than expected.

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Medicaid is a health insurance program that serves 1.68 million low-income Maryland residents, funded jointly by the state and federal governments. During the height of the coronavirus pandemic, members of Medicaid across the country did not have to prove their eligibility for the program.

Once Medicaid enrollees were again required to submit eligibility paperwork, it’s been challenging for officials to predict how many people will qualify for the program.

There’s also been unprecedented demand on the Child Care Scholarship Program, with unemployment dropping and day care options still expensive for many working families.

When Moore took office in January 2023, about 24,000 children were enrolled. That number jumped to 33,000 by the end of 2023 and Moore administration officials predicted — and put enough money in the current budget for ― up to 40,000 children. And they’ve already hit that number.

Ongoing financial pressure

The state’s financial situation has become an increasing concern for officials, with long-term projections showing there is not enough money coming in from taxes and other sources to pay for government programs.

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The current state budget year just started on July 1, and it includes a variety of tax and fee increases that lawmakers added to Moore’s initial proposal — after he boasted in his proposal that he closed a modest budget gap without any fee and tax increases, instead relying on targeted cuts that he called “re-basing” of funding levels. Moore signed off on the revised proposal.

Maryland’s budget is required to be balanced each year, and governors and the General Assembly have often shuffled money around to fulfill that requirement. But the long-term budget pictures shows the gap widening each year, under pressures such as the ambitious and expensive Blueprint for Maryland’s Future, a multiyear program to improve public schools.

By 2028, the shortfall could grow to $3 billion if no actions are taken, according to a recent government report.

The state’s top lawmakers aligned in support of the governor’s proposal, saying the move was fiscally prudent and protected key programs.

“The ever-changing fiscal complexities of our economy and our State budget often require difficult decisions,” said Senate President Bill Ferguson, a Democrat representing Baltimore.

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“Every state is dealing with fiscal challenges without federal COVID funding,” Maryland House Speaker Adrienne A. Jones, a Baltimore County Democrat, said in a statement. “Today’s budget announcement is part of an ongoing process where we’ll look at every option to continue to balance our budget and protect our priorities.”

Del. Ben Barnes chairs the House Appropriations Committee. In a text message, the Democrat applauded Moore “for recognizing our fiscal challenges ahead and getting in front of them” and said he looks forward to working the governor as the state gathers more data and revenue estimates.

“We have to be honest with Marylanders about the challenges ahead and also be clear that our first priority has to be protecting critical programs,” said Barnes, who represents Prince George’s and Anne Arundel counties.

Del. Jason Buckel, the Republican minority leader in the House of Delegates, said that at first blush, the governor’s proposal appears to be a responsible way to address short-term budget concerns. “The cuts seem to be reasonably balanced across the state and across the programs,” said Buckel, who represents Allegany County.

But $150 million, while a lot of money to most Marylanders, represents just a fraction of the state’s overall $63 billion budget. Broader, more difficult conversations will be necessary to figure out a solution to the long-term budget woes, Buckel said.

“At some point in time, you have to take actions which show you’re serious about fiscal sanity,” Buckel said. “This is somewhat of a step in the right direction, but it’s not going to solve the problems of how we will possibly pay for the Blueprint as currently phased-in” and mass transit projects like Baltimore’s proposed Red Line.

Sen. Stephen Hershey, the Republican leader in the Senate, said it’s important for government to fund health care, which is “critically important” to the state. “At the same time, this doesn’t do anything to address the structural deficit that is looming,” said Hershey, who represents the Eastern Shore.

Maryland’s state government has retained the top rating on its bonds, which allows the state to borrow money for big projects at the lowest interest rates. But one of the ratings agencies, Moody’s ratings, downgraded the outlook on Maryland’s bonds from “stable” to “negative,” noting the mounting financial pressures.

Moody’s expressed caution about the state using budget reserves to help close the “expected structural imbalance.”

“The negative outlook incorporates difficulties Maryland will face to achieve balanced financial operations in coming years without sacrificing service delivery goals or adding to the weight of the state government’s burden on individual and corporate taxpayers,” Moody’s wrote in its most recent report in May.

Correction: This story has been updated to note the number of children enrolled in the Child Care Scholarship Program when Gov. Wes Moore took office.