On July 9, 2020 Maryland’s Budget and Taxation Committee gave a virtual briefing offering an update on the 2021 Fiscal year. Read on for updates on Maryland’s economic outlook from David Romans of the Department of Legislative Services and Secretary David Brinkley of the Department of Budget Management.
David Romans, Fiscal and Policy Coordinator
Department of Legislative Services
Outlook of ongoing General Funds Revenues
It is important to note that we are trending alongside the S2 (blue line).
- Current numbers have us at a 20 year high.
- Board of Public Works approved the following reductions on July 1, 2020. The left column displays the Fiscal Year 2021 Legislative Appropriation of Funds, while the right column is the appropriation of funds as approved July 1, 2020. The governor hopes to readdress cuts in August.
Further details of these cuts are below:
Challenges discussed:
As well as actions not discussed in the Administrations reduction plan:
**Please note that the above slide indicates $1,055 Million allocated to local governments but the correct amount is $1.055 BILLION per Mr. Romans**
None of the money can be spent without a budget amendment.
The current outlook does not factor in a “second wave” of the virus, the development of a vaccine, and additional congressional action.
The State faces a $5 billion budget challenge under the S2 scenario over FY 2021 and FY 2022.
State actions will be needed to address the shortfall in order to position the State to weather a longer term slowdown.
Q&A
Senator Cory McCray: My question is dealing with page 5, I can see, I know very clearly in reference to $2.5 million Attorney General positions, but I wasn’t very clear in reference to Baltimore City Crime Prevention $1.9 million cut, could you elaborate on that and I have a second question.
David Romans: Sure, there are some reductions to…I can’t remember the new name of that, the old governor’s office of Crime Control and prevention gives out a lot of grants for local governments and they were some reductions to some of the funding for the Baltimore City crime prevention program I’m happy to get you the details of that reduction.
Senator Cory McCray: Thank you that would be greatly appreciated. The second question is still dealing with page 5. I’m under the persuasion that the K formula for community colleges obviously they got a bump for fiscal year 2021 and looks like and then they were level funded with the cuts to fiscal year 2020, I don’t know if that accurate, but then I’m going to go down to Baltimore City Community College they weren’t one of the benefactors of the increase increase the current fiscal cycle, but they still receive that 3.5 million dollar Cuts would it be accurate to say that there they were at a disadvantage because they aren’t level-funded at this weekend 2020 just as each and every other community college was or am I incorrect
David Romans: You are correct, Baltimore City Community College funding goes down about 8% versus FY 2020 spending level. They are seeing the deepest reduction of any of the higher education institutions, community colleges or four-years in the state.
Chairman Guy Guzzone: That WMATA money, is all of that money, both segments of it, part of the mutli-jurisdictional agreement that we had with DC and Virginia?
David Romans: Yes.
Chairman Guy Guzzone: So do we know if the other jurisdictions are honoring their commitment on their end on this?
David Romans: I don’t have a lot of details on that, it sounded as though the other jurisdictions were talking to WMATA about making reductions, but I have not seen any specific actions.
Chairman Guy Guzzone: I noticed on the part when you talked about the potential revenue increases with the cigarette tax that you added that, I noticed that you didn’t put anything on there about the digital downloads or digital advertising. We all know that the advertising components has some legal issues associated with it the potential challenges, what about the downloads?
David Romans: The downloads is certainly another item that the General Assembly could override the veto. Right now the download money would go to the Blueprint Fund for Education. So we didn’t include it there because it doesn’t directly go into the General Fund, but certainly if the veto is overridden you could change the statute to use the Blueprint money differently if you so chose.
Chairman Guy Guzzone: Sort of finally, a big picture question, we had projected structural deficits out into the future prior to COVID. I just wanted to be sure that we all understood these scenarios as to and as for, are those previous structural deficits already baked into those numbers?
David Romans: We’re showing you the cash problem, because at the moment getting the cash issue solved is the challenge, but I mean in the out-years we’re probably looking at a $3 billion structural problem that’s underlying this which is why some level of ongoing reduction would certainly be very helpful. I mean one of the reason we didn’t show you the structural and we didn’t show it out through Fiscal 25 as I said the revenue outlook is so uncertain even six months from now that at the moment right now that the revenue forecast through 25 in S2 and S4 is quite bleak, but it’s really hard to know how accurate that is until we see how things progress with vaccines and treatments.
Secretary David Brinkley
Department of Budget and Management:
- Unemployment claims hit half a million in 8 weeks
- Job losses twice as bad
- TCA caseload doubles in 5 months (currently greater than during Great Recession)
- Revenue losses estimated to be significantly higher.
The following graph demonstrate the losses due to COVID.
The following graph displays the different projections:
Temporary Cash Assistance has risen 110% since 2009:
Changes to future projections:
The green line is the current projection as of March 2020. The S4 projection is the solid red line.
Ways the State has dealt with the sudden loss of revenue:
It is important to note that the following numbers reflect the S2 projection, which is the trend we are currently seeing.
- Board of Revenue Estimates is not scheduled to meet again until mid-September, however, they may have an informal conversation prior to then. However, at this time there is no scheduled conversation.
- There has been a backfill for higher education and local aid by the federal government. The State will also continue to work with community colleges.
Q&A:
Senator Cory McCray: My question is in reference to the $200 million for education, are there any specific recommendations educational wise that the administration is going ot be putting forward around at $200 million dollars?
Secretary Brinkley: Are you talking about the day that we put out of the future actions?
Senator Cory McCray: Yes, sir.
Secretary Brinkley: So where that number came from was just simply a program increase that was already moving forward on education under the formulas under GCEI and under the inflation. It’s a placeholder number but, we can’t take that action. I will tell you my reason for having that out in the public was simply so that everybody who is in line to receive potential money’s realizes that when the legislature comes in, we all know the magnitude of what this will be of what this will be. But everybody has got to be put on notice.
Senator Craig Zucker: In reference to Mr. Roman’s budget amendment relating to COVID. Is a budget amendment forthcoming and if so, when.
Secretary Brinkley: They will have to be forthcoming, but I don’t know where they are on the stage. I can tell you now that we created a special workgroup with a person from DLS, the top analysts from DBM, the primary finance person from DOH and I think the procurement person from DGS and they have their ability to make commitments. Now making a commitment is one thing and actually getting invoiced and then sending money out the door is different. The second thing is that my team has been busting their tail with DBM health and DGS on that one work group. They’re moving forward my team has worked overtime, and no one could foresee it, on how to prepare to deal with 21.
Senator Craig Zucker: In terms of the $10 million going to help the local schools with technology divides, that’s going to be disbursed?
Secretary Brinkley: That is correct, Marc would you like to chime in?
Marc Nicole: Sure, so, the Secretary is correct that in the broadband we’re having some communications going on between Department of Housing and Community Development and school systems about sort of how that money goes out. What you will see there is a little bit of difference, some of the funding that you’ve seen announced will be Fiscal 21 versus which some of it will be Fiscal 20. Obviously, the FY 20 amendments need to be processed pretty quickly as the State begins to sort of move to close out.
Senator Melony Griffith: Both the timing of expenditure and the procurement process as you know we’ve been having subcommittee hearings and there were a lot of questions during the HHS subcommittee about the procurement of services and the process by which announcement are made to release funds so that we make sure that businesses is in every jurisdiction are able to compete for some of the CARES related funding. Are we, to your knowledge, doing a broad solicitation or call for applications when we release these funding opportunities, particularly those that we have strong Maryland business communities that are able to respond to and then I guess my second question is are we prepared and you spoke to this a little bit to make sure that we utilize all the funding available. I know you guys have been working extremely hard so that we maximize the federal funding and that we’re using it to backfill wherever possible. I think that many of us have the worst nightmare one that we don’t use all the funds that we have available and could have provided some much needed revenue to our jurisdictions or two that the funding doesn’t stimulate the kind of response that we could have had. So, I guess if you could just speak as to those issues.
Secretary Brinkley: DBM handled procurement up until October 1, 2019. At that time, a bill was passed which consolidated all procurement into DGS so therefore, we don’t have that role. We had previously handled procurement on all services and they were the largest contracts that the State offers, and had we still been under that scenario, I might be able to offer some insight, therefore, I can’t offer any insight to what you’re doing, which is also why the DGS procurement person is on that little three person workgroup that we have with John and then also DOH. The second part, we are not going to run out of things to spend this money on. There is not going to be anything left as we’re going through it. As you can see, we are trying to avoid certain reductions in the budget if nothing else to buy time, even counties are now looking for things that they can spend on. Marc and I were having a conversation about potential uses because, you know there are a couple of hundred people who have an idea for how we could spend that money, but if we can use the bulk of it for that 25% match, that leaves a relatively small amount. We don’t know what we’re going to be faced if we do or don’t get a second wave. We don’t know if we will be able to use some of that for unemployment side. We don’t know potentially as to what the need is going to be on childcare. Those are some other issues that could be a major impediment to getting some people back to work. The point is, there are so many different avenues that we foresee on the horizon that we won’t leave a dollar on the table.
Senator Sarah Elfreth: I want to hone in and emphasize Senator Zucker and Senator Griffiths questions about planning for the future rather with budget amendments that certainly the $450 million that’s left unallocated from the past CARES act money. Number one, what is the timeline of planning for when the administration will be announcing those in addition to the budget amendment, but I want to highlight one particular concern for my school system in Anne Arundel County, but I know for schools across the state whether they reopen totally, in person come August or not they’re still making those determinations, but it’s estimated that the cleaning supplies and staff to clean properly all the schools will cost approximately $486 per student for the new year, none of which to my understanding, is being currently calculated or allocated in the school systems budget, so my question, is whether part of the CARES Act funding will be directed towards schools to help address that particular concern that many of our school sysems and in our parents and family certainly have.
Secretary Brinkley: We’ve already allocated quite a bit of money to the school systems, and if I’m not mistaken, they were also entitled to some money, maybe certainly not as much directly from the federal government. I think Anne Arundel County is one of those with 500,000 so they had a direct pipeline on it.
Marc Nicole: the governor’s announcements last week for $200 million in additional spending to help all the local school systems across the state could be of some assistance in sort of freeing up some dollars. For instance, the one piece that I would think might be of some assistance is so there’s an additional $100 million that could be available for sort of technology. Now some school systems have done a great job getting a device into the hands of all the students and to the extent that sort of might be the case already, then you know maybe the state money is used to sort of cove things that the local government has spent already. They will free up the local funds to be used for sort of those sort of cleaning supplies in the case that there’s still a great need on technology and $100 million is used to make sure that you know every child has a device certainly as you mentioned, there’s still some money that’s sort of available for future use, but that’s something that we sort of have to watch very carefully as the rest of the year moves forward. I would also note though, to the extent the federal government changed the rules for us with how we use disaster relief, it has also benefitted the local government, a local government that may have received, say $100 million, in coronavirus relief funds with a new sort of federal match rules, could have somewhere between really $300-400 million of total spending available. There’s a lot more flexibility now in the local allocations to use money for eligible expenses, and I think just the things that you talked about are clearly eligible expenses.
Senator Johnny Salling: We already knew the previous budget problems that we had, for instance with gas tax and with our revenues getting from that, but also we can see that continuing to be a problem for all… we know that the funds that we need that are going to be coming from the federal government and I know that we are going to be dependent on them more than anything else because that’s a relief that we truly do need to continue. How much more do you believe we need to continue to depend on that and our revenues?
Secretary Brinkley: The federal revenues and while everyone’s looking toward them and our federal delegation is working on it, keep in mind that we can’t keep counting on this, this might be the end of it, it might not be the end of it, but it’s not a long-term fix. All of our long-term, and this is where we get into the programs and mandates that we got to deal with, that’s where you start the conversation on the structural challenge. Right now, we are dealing with cash flow, short-term, what’s going to the feds and what’s not going to come. But that becomes the conversation of what’s sustainable and there will be plenty of opportunity for everybody to have inputs on what they need to what they need to do.
Senator Nancy King: David, in listening, I’m just sitting here listening and thinking about how connected so much of what we are funding. Just an example, the daycare providers, we’ve heard a lot from them, very concerned about the funding continued for them and where they can take a cut. We have to have the daycare providers opening so that people can go back to work, and it’s so much of it connected. Is there a way of looking at all of it and as far as what is connected and what has to happen here so that another thing can continue?
Secretary Brinkley: So that’s the thing, you’re right it’s kind of like this bridge, it’s interconnected with all these sticks and or I guess another way to look at it is any changes as strong as its weakest link, what do you have to do to reinforce this, then you would potentially identify something else that’s short, meanwhile, the virus keeps doing its thing. That’s one thing we recognize, it’s one thing to have people stay home and isolate to stay safe, it’s another thing to potentially open back up, but then they don’t have the services or the capacity so that they can you have their children in some safe environment. In the other conversation that’s taking place, is what constitutes a safe environment. If we’re trying to keep distancing, at what point do you keep kids at distance and then also people that work with them. That’s why it’s going take some additional resources and we might have to be more forgiving.
Senator Jim Rosapepe: My question relates very directly to the federal money issue, is predicting what the Congress is going to do is way above our pay grade, but the House of Representatives has passed a bill six weeks ago, eight weeks ago that has $500 billion just for state governments. We’re 2% of the country, that’s $10 billion if that were actually go through. Now is what passed the US House going to happen, no, we don’t know what the Senate’s gonna do, no, we know we have an election in the fall, but I thought because you all are following this and as you pointed out Marc is chair of the National Budget Group, I would be interested in your all’s perspective on speculations with a little more granularity because one house of the Congress has passed a bill with very specific numbers in it, and the Congress will or will not act before the election, after the election, the Congress will act, I don’t think there’s any question about that, I’d be interested in what you all have heard, what you all think about the federal money as beyond we don’t know.
Secretary Brinkley: I think right there’s the answer, we don’t know like you said trying to predict what’s going to happen.
