Maryland Senate OKs budget to address a $3B deficit with concerns about Trump administration cuts

Associated Press

01-04-2025

ANNAPOLIS, Md. (AP) — The Maryland Senate passed budget measures on Tuesday to address a deficit of more than $3 billion with tax increases and cuts throughout state government, as well as plans for spending adjustments that could be triggered by future federal cuts from the Trump administration.
The Democratic-controlled legislature is largely in agreement on the spending plan for the next fiscal year after a deal was announced last month with Democratic Gov. Wes Moore.
Uncertainty with dramatic federal government downsizing has been a major concern during the 90-day legislative session in a state that relies heavily on federal government jobs and contracts.
Lawmakers have included measures in the state budget to make adjustments in anticipation of more cuts to come. For example, the Senate added a provision that if $1 billion in federal funding to the state is cut, the governor's budget office would submit a plan to a panel of lawmakers on how to adjust state spending.
'As everyone in Maryland knows, Maryland is under attack from Washington,' said Sen. James Rosapepe, a Democrat whose district is in the suburbs of the nation's capital. 'The national economists have projected that Maryland is a state most at risk to from the (Elon) Musk-Trump cuts to the federal government.'
Last month, the ratings agency Moody's noted the threat to Maryland from changing federal priorities and policies, using metrics as diverse as the share of workers federally employed, scientific research grant funding and federal contract awards.
Moody's also pointed out that Maryland is home to the headquarters of the National Institutes of Health, the Food and Drug Administration, the Centers for Medicare and Medicaid Services, the National Oceanic and Atmospheric Administration and the National Security Agency.
The state found out Friday that it could be losing more than $400 million in federal education funding after the U.S. Department of Education told states it was canceling approvals made earlier to spend COVID-19 recovery money.
Rosapepe said the state already had made $350 million in additional cuts this year 'simply because of the first rumblings of the Trump recession' and that Maryland lawmakers are bracing for more cuts.
'We don't know when they're coming. We don't know how big they're coming, but we know these attacks are coming,' Rosapepe said.
The senator also said the budget 'shows that we're not rolling over for the attacks on Maryland,' noting investments in health care, education, public safety and transportation.
But Republicans said Maryland's budget problems were brewing before Trump regained the White House, largely due to overspending and its reliance on federal spending.
Sen. Steve Hershey, an Eastern Shore Republican who is the Senate minority leader, said lawmakers knew what they were facing when the legislative session begin in early January, before Trump took office.
'I think the anger that we just saw right there is more a reflection of the recognition that this state over-relies on federal government, and now all of a sudden changes are being made at the federal government, because people want to see a change,' Hershey said, referring to Rosapepe's comments.
Hershey said Maryland lawmakers continue to pass legislation that adversely affects state businesses, including a new 3% tax on information technology services that is part of the legislation to balance the budget.
The plan includes two higher tax brackets, one for residents who make over $500,000 annually and another for those with more than $1 million in annual income. The legislation includes a new 2% tax on capital gains for people with income over $350,000. Tax increases on recreational cannabis and sports wagering also are part of the plan.
'You cannot tax your way to prosperity, and that's what this legislation would do,' Hershey said.
The plan includes a long list of cuts throughout state government adding up to more than $2 billion, though Republicans say lawmakers should have tightened spending even further to avoid tax increases.
Lawmakers will be working to bridge some differences with the Maryland House and take a final vote on the roughly $67 billion spending plan and related legislation to balance the budget before they adjourn Monday at midnight.