Senate President Bill Ferguson (D-Baltimore City) laid out $1 billion in potential service cuts that he said “scare me because they’re very real and being contemplated” as lawmakers struggle with the budget. (File photo by Bryan P. Sears/Maryland Matters)
The leader of the Maryland Senate unveiled $1 billion in new budget cuts Friday that he said could be considered as state leaders contemplate continued uncertainty in the federal budget.
Senate President Bill Ferguson (D-Baltimore City) said the legislative session now entering its final three weeks “is continuing to be the most uncertain session that I have ever experienced in this role and in the 15 years I’ve served in the legislature.”
Lawmakers are moving closer to finalizing a fiscal 2026 budget that must address a projected $3 billion structural budget gap as well hundreds of millions in lower-than-expected revenues announced earlier this month.
They got a rare bit of good news when it appeared Congress would be able to avert a potential federal government shutdown at midnight Friday. A new report by Moody’s Ratings ranks Maryland at the most risk from federal budget actions.
Gov. Wes Moore (D) proposed a budget with $2 billion in cuts and a tax modernization plan that would cut taxes modestly for 60% of Marylanders, while raising taxes on the state’s highest earners.
Lawmakers are expected to tinker with Moore’s proposal, and recently added a plan for a possible 2.5% tax on services between some businesses.
The Senate president said his chamber will expand Moore’s $2 billion in cuts by as much as $500 million, and warned of more if there are additional spending and employee reductions at the federal level.
Ferguson showed reporters a graphic of 10 possible budget cuts of about $100 million each, what he called “10 illustrative, real examples, things that we are actively contemplating incorporating into” a potential budget.
They include three Medicaid cuts that would net $100 million each: Dropping coverage for more than 11,000 people; cutting dental care for every Medicaid recipient; and eliminating Medicaid coverage for pregnant women who earn 264% of the federal poverty level.
Another nearly 37,000 people could lose food stamp benefits, 36,000 could see unemployment claims go unpaid and more than 114,000 households would lose home energy assistance.
The list also included several public safety measures, including releasing more than 1,500 inmates or closing either Spring Grove Hospital or Clifton T. Perkins. Both offer forensic psychiatry services to people charged with crimes, including violent offenses.
“As we face these difficult choices, these are just 10 examples of how you get to the next billion,” Ferguson said. “We have got to figure out a path towards sustainable revenues as well. And so that is … the balanced approach that we are going to continue to try to take.”
Ferguson, who has said he has a “high bar” for raising taxes, was asked if the chart was meant as a scare tactic to boost acceptance of a coming increase.
“All of those cuts certainly scare me. And they scare me because they’re very real and being contemplated,” Ferguson told reporters.
“We are constitutionally required to balance our budget. We will, and we are going to make additional cuts. We are at the place now where we are talking about core service provision of the social safety net that’s impacted if we just had a cuts only approach,” he said. “And so yes, it is scary, and we know that … this is what we should be counting on government to be able to provide. And I believe most Marylanders agree.”
A ‘broader’ business sales tax?
One revenue source under consideration is a tax on some services between businesses. The current proposal – late-filed bills in the House and Senate — includes a 2.5% sales tax on business-to-business services including accounting, consulting and tech services. Tech services and consulting would pay 66% of the tax under the current proposal.
Business leaders voiced their opposition during hearings Wednesday. But Ferguson said he believes some version of the tax will be included in the final budget plan for fiscal 2026.
He added his chamber is looking at excluding independent contractors, sometimes called “1099 employees.” Other changes could come to sole proprietorship businesses or specific industries that are disparately impacted. He did not give an example.
A plan could emerge for a services tax that applies to more businesses, but at a lower rate.
“I would love to find a way to have a broader base and a lower rate, which I think is a more efficient tax approach,” Ferguson said. “But we have to figure out how far we can get in cuts, and then what the gap would be, to see what we’re going to need in order to be sustainable moving forward.”
Meaningful rate relief ‘in the eye of the beholder’
The legislature is also facing growing public outcry over spiking utility costs that are expected to shoot up again in the summer.
Utility companies and regulators were grilled Wednesday by two committees seeking answers. Ferguson said days earlier that the hearing was about finding options for immediate rate relief and was not meant to “create scapegoats and bogeymen” to deflect ire away from lawmakers.
Solutions remain elusive.
“We are looking for any possible solution to get money into the hands of ratepayers to help with the burden of increased energy costs,” Ferguson said.
But he acknowledged the challenge “because I’m not sure that there is a short-term solution. We know that we have to make decisions today that allow for longer-term solutions, getting more Maryland-made energy so that we have greater predictability, reliability and affordability and energy. But we are looking forward to putting some measures in the budget this year that will at least get some level of resources to ratepayers who are really struggling.”
Ferguson was asked if the relief would be meaningful.
“I think anything is meaningful, and it’s in the eye of the beholder,” he said. “We’ll do whatever we can that is fiscally responsible for the long term … financial health of the state to help ratepayers however we can, while building for the future.”