Maryland Projects $1.4 Billion Deficit As Spending Growth Outpaces Revenue

ANNAPOLIS, Md. — Maryland budget analysts say the state is heading into the 2026 Legislative Session with a projected $1.4 billion structural deficit, driven by spending growth that continues to outpace revenue and by long-term obligations in health care and education. Analysts also warn the state’s cash balance could fall into the red by fiscal 2027.

In a briefing to the Spending Affordability Committee, the Department of Legislative Services(DLS) reported that general-fund spending will rise about 5% in fiscal 2027, led by increases in Medicaid, behavioral health, local education aid, debt service, and other entitlement programs. DLS charts show general-fund spending up $1.4 billion net of deficiency appropriations.

A projection in the briefing shows both cash and structural shortfalls deepening through the decade, even with the rainy-day fund near 8 percent of revenues. DLS estimates ongoing revenues will cover only 89 percent of ongoing spending by fiscal 2030.

To balance the 2025 budget, lawmakers approved new revenue measures through the Budget Reconciliation and Financing Act of 2025, including two new top personal-income-tax brackets (raising the top rate to 6.5 percent), caps on itemized deductions, an expanded child-tax credit, a 2% capital-gains surtax partly dedicated to transportation, and sales-tax base expansions covering vending-machine snacks, precious-metal bullion, and certain data or IT services.

Separate transportation legislation in 2024–2025 raised multiple motor-vehicle and transit-related taxes and fees — including title and registration fees, a vehicle-excise-tax increase to 6.5 percent, VEIP fees, an electric-vehicle surcharge, a ride-share (TNC) fee, and a new tire fee — changes projected to generate about $4.8 billion in new revenue from fiscal 2026 through 2031.

Senate Minority Leader Steve Hershey (R) said the forecast confirms what Republicans have been warning for years, calling the shortfall “the predictable result of runaway spending.” He said Democrats “tied Maryland taxpayers to new, expensive, long-term programs like the multi-billion-dollar Blueprint for Education and the unchecked expansion of entitlement programs — with no sustainable plan to pay for them.”

Senate Minority Whip Justin Ready (R) predicted the 2026 session would bring election-year issues and said in a press release on November 12 that leaders would “do everything possible to paper over the problem until after November,” adding that “these programs are growing faster than our economy — and the bill is coming due.”

Hershey said in that same release that the deficit “didn’t just appear — it’s the direct result of choices made by one-party rule in Annapolis,” warning that “if we don’t change course, Marylanders will be paying for those choices for years to come.”

Sen. Guy Guzzone (D-Howard), chair of the Senate Budget and Taxation Committee, told Maryland Matters that the DLS estimates are “the worst-case scenario, literally at a point in time,” emphasizing that updated forecasts will refine the numbers before lawmakers finalize the budget.

Acting Budget Secretary Jake Weissmann, speaking for the Moore administration, said the governor’s team has “already begun working collaboratively with legislators to produce a balanced budget that protects Marylanders,” noting that “ongoing issues in D.C. are affecting every state — and none more than Maryland.”

The Blueprint continues expanding through 2031, with annual spending growth outpacing revenue growth.

As the General Assembly returns in January, lawmakers are preparing for a Legislative Session that will test how the state balances expanding programs with long-term fiscal reality in an election year.

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