The Maryland State House. Photo by Bryan P. Sears.
Maryland’s revenue forecast for the coming year will remain statistically flat, according to a new forecast released Thursday by the Board of Revenue Estimates.
The forecast, which included a modest upward revision for the current budget year, is the first look at fiscal 2026 revenues.
State Budget Secretary Helene Grady, one of three members on the board, said the “modest positive adjustment” to revenue forecasts “obviously is helpful as we navigate fiscal ’25 and we work to build a responsible budget for fiscal ’26, but it doesn’t materially alter in any way the challenges that we face with the general fund budget for fiscal ’26.”
Those challenges include a nearly $1 billion structural budget gap in fiscal 2026 that was forecast by budget analysts in January.
Thursday’s forecast predicts an $88 million increase in revenues for the current budget year. Sales taxes are now expected to be down $116 million than originally expected in fiscal 2025, and estate and inheritance taxes are projected to be $62 million lower. But those will be offset by nearly $174 million in additional corporate income taxes and a $95.5 million increase in projected interest earnings on investments.
Comptroller Brooke Lierman (D). File photo by Bryan P. Sears.
Comptroller Brooke Lierman (D), who chairs the board, said the new estimates show “the economic outlook has not changed compared to the expectations outlined in March. Revenue growth in the state is still expected to be slow but positive.”
Those modest increases continue into 2026, according to the first estimates released by the panel for the coming fiscal year. The panel forecasts revenues of $25.3 billion for the coming fiscal year — an increase of 0.9% over the current budget year.
Robert Rehrmann, director of the Bureau of Revenue Estimates, said the updated estimates also do not include expectations of a recession.
“So, I remain cautiously optimistic about Maryland’s economic performance and the resilience of our economy overall,” Lierman said.
The board will issue revised projections in December for the current and coming year. Soon after, the legislative Joint Spending Affordability Committee will make recommendations on budget growth to Gov. Wes Moore (D). Those recommendations, while not binding, are traditionally followed.
“Moderate growth is growth, and Maryland’s economy is moving in the right direction,” Senate President Bill Ferguson (D-Baltimore) said in a statement.
Ferguson added that the new projections “reaffirm the Senate’s focus on the need to continue growing our economy to the benefit of all Marylanders while remaining competitive regionally and nationally.”
Looming in the background are concerns about federal spending, the coming election and expected post-election battles over both the federal debt ceiling and the federal budget.
With less than a week left in the current federal fiscal year, Congress on Wednesday passed a continuing resolution that funds government operations through Dec. 20, and President Joe Biden signed it Thursday, heading off the threat of a government shutdown. But that just defers the problem, said Maryland Treasurer Dereck Davis (D), the third member of the board.
Maryland Treasurer Dereck Davis (D). Photo by Bryan P. Sears
“To be perfectly honest, I’m not really that surprised that we averted a shutdown. See, as long as it affects other people, there’s always that threat of a shutdown,” Davis said of the continuing resolution. “But because a shutdown would adversely affect the members of Congress, they couldn’t have that. So, they found a way to get this done in time for the November election. I promise you it won’t be that smooth come … December.”
There are also growing concerns about where the state is getting its revenues.
Rehrmann warned that the state’s revenue portfolio is becoming less diversified and more reliant on volatile sources.
“We’re getting more of our revenue specifically from our income taxes, and we know our income taxes are more volatile,” said Rehrmann. “So, all things being equal, this can introduce some volatility and make our lives a little bit more difficult in terms of forecasting our general fund.”
Moore and his team will also face other pressures.
The state continues to struggle with addressing employee vacancy rates.
Moore promised as he entered office in 2023 to cut 10,000 vacancies — his own estimate — in half in his first year. Not only did Moore fall short of that goal, but the pace of hiring struggled to keep up with the number of employees who retired or left state government for other jobs.
Moore added 700 positions to the current budget, then suggested in July that the state would have to defer filling those new positions and others while it grapples with fiscal realities — remarks that came as the state said it was cutting $150 million from departments and programs this year. That money was needed for growing expenses from Medicaid enrollment and child care subsidies.
Lawmakers warned those increases could account for nearly $1 billion in budget shortfalls over two years. That is on top of a roughly $1 billion structural budget gap already projected for fiscal 2026.
AFSCME Maryland Council 3 President Patrick Moran. File photo by Bryan P. Sears.
Even so, the leader of one of the state’s largest public employee unions, is calling for Moore to ramp up hiring.
“Our state remains in a staffing crisis where over 10% of frontline positions in our state agencies are vacant,” said a statement from Patrick Moran, president of American Federation of State, County and Municipal Employees Council 3. “This doesn’t even account for the thousands of additional positions that need to be budgeted for in order for the State to be able to meet its responsibilities to provide Marylanders with the quality state services they deserve.”
Moran called for more hiring and increased taxes to close the budget gap. But Moore and Ferguson said in August that any tax increases would have to meet a “high bar,” and that the state’s focus should remain on growing the economy rather than tax increases.
That stance could put Moore and Ferguson at odds with progressive members of the House of Delegates and the Senate who favor tax increases on corporations and high-income earners.
“There needs to be a re-prioritization of staffing so that Marylanders receive the proper services they need and deserve,” Moran said in his statement. “Resources need to be committed to this effort, and tax credits to the ultra-wealthy and large corporations as well as wasteful outsourcing need to be curtailed.”