Governor Larry Hogan Announces Fiscal Year 2018 Budget

Responsibly Holds the Line on Spending, Provides Record Investment in Education, Allocates $1 Billion in Reserves

ANNAPOLIS, MD – Following a bipartisan briefing for the fiscal leaders of the Maryland General Assembly, Governor Larry Hogan announced major items in the administration’s fiscal year 2018 budget, which will be officially submitted on Wednesday, January 18. The governor’s FY 2018 budget responsibly holds the line on spending without raising taxes, cutting services, or raiding special funds. The budget leaves $1 billion in reserves and continues – for the third straight year – to fund K-12 education at an all-time record level.

The administration’s proposed budget is 100 percent structurally-balanced and immediately addresses current revenue volatility the state has experienced, while positioning the state to remedy future revenue shortfalls by spending less in General Funds in FY 2018 than in FY 2017.

“The budget we are announcing today decreases general fund spending in real dollars. It doesn’t just slow the rate of growth, but it actually spends less than last year’s budget, while still fully funding our priorities, including record funding in K-12 education for the third year in a row,” said Governor Hogan. “We are able to accomplish this with no new taxes, no cuts to services, and without raiding dedicated special funds, and once again, this budget is 100 percent structurally balanced.”

“It is clear that we must come together, roll up our sleeves, and have a rational discussion about reining in uncontrollable spending and debt in Annapolis and finally learning to live within our means,” the governor continued.

By planning ahead, the FY 2018 budget further establishes the fiscal restraint Governor Hogan pledged to return to Annapolis, while continuing to make strategic investments to attract new businesses and create jobs. This budget prioritizes funding for all levels of education and protects the network of services for vulnerable Marylanders.

The FY 2018 operating budget totals $17.1 billion, including a $6.4 billion investment in K-12 education, fully funding education aid. It also makes responsible investments in higher education, while holding tuition increases in the University System of Maryland, at Morgan State University, and at St. Mary’s College to two percent. Community colleges are fully funded at $256 million, which includes an additional $4 million above the formula funding – a new record high level.

To address the growing heroin and opioid crisis threatening Maryland and the nation, the governor’s budget contains $1.3 billion for mental health and substance use disorder services, along with an additional $4 million in funding to bolster the state’s work to help those struggling with heroin and opioid addiction.

The FY 2018 budget either meets or exceeds all of the recommendations of the legislature’s Spending Affordability Committee. This budget is 100 percent structurally balanced – double the recommended 50 percent level – and leaves a fund balance of $144 million, which is more than recommended.

The administration’s FY 2018 capital budget again limits borrowing to $995 million, which is necessary in order to keep the state’s debt service payments from rising out of control.

“After years and years of running up the credit cards, the result is devastating. Next year, the state will be forced to spend more on debt service payments than we will be able to spend on school construction, which is completely unacceptable,” said Governor Hogan. “With the actions our administration has taken over the last two years, and those that we are taking this year, the state will save nearly $700 million in debt service payments – but we need to do more.”

Despite the administration’s continued fiscal restraint and responsible budgeting, legislatively mandated spending accounts for 83 percent of every dollar spent and forces spending to grow at a rate faster than current revenue projections. These forced spending increases are a major contributing factor to the structural gap the state is facing.

“Every Marylander understands that if you are consistently forced to spend more than you take in year after year, eventually you will have a serious problem,” said Governor Hogan. “Our administration is once again introducing legislation to control these forced spending increases that exceed revenues.”

The governor's "Common Sense Spending Act of 2017" would limit the growth of mandated spending in FY 2019 by giving the state flexibility to limit mandates that grow faster than the state’s revenues, while preserving funding for critical areas like education and debt service payments. The governor also unveiled the the “Fiscal Responsibility Act of 2017," which will address revenue volatility by ending the practice of using temporary revenue spikes to fund known recurring future expenses.

Below are highlights of the FY 2018 Budget, which holds the line on spending while prioritizing prudent investments in areas including education, economic development, public safety, the environment, and health care:

Investing in Education:
A record $6.4 billion state investment in Maryland’s public schools, fully funding all state aid programs. Direct aid to local schools grows by $60.4 million. This is the third consecutive year that the administration has provided record education funding.
$600,000 in planning grants for six new P-TECH schools in Maryland, double the total number of schools in FY 2018.
The Broadening Options and Opportunities for Students Today (BOOST) Program grows by $2 million to $7 million as part of state’s commitment to double the funding for the program over three years.
Fully funding the state aid formulas for the Maryland School for the Deaf at $31.6 million and the Maryland School for the Blind at $23 million.
$17.5 million in additional state funds to hold tuition increases to 2 percent for resident undergraduate students at the University System of Maryland (USM) institutions, Morgan State University, and St. Mary’s College of Maryland.
$1.35 billion in state funds to the USM, a 2.2 percent increase over FY 2017.
$93.8 million in state funds to Morgan State University, 2.5 percent higher than the current year.
$25 million in formula funding for St. Mary's College in FY 2018, bringing total funding to $72.7 million.
The Maryland Higher Education Commission’s budget includes $4.9 million to fund enhancements at Maryland’s four historically black colleges and universities.
The Cade Program for local community colleges is fully funded in FY 2018 with $256.1 million in formula and grant funding - a new record. This includes an additional $4 million provided by the governor as a one-time grant to the community colleges to supplement their formula funding.
Baltimore City Community College receives $40.6 million in state funding for a total budget of $85.7 million.
The Sellinger Program for Maryland’s independent colleges and universities is funded at $46.8 million.

Jobs and Expanding Opportunities for Businesses:
An additional $10.2 million in general funds, bringing the total to nearly $24 million – a record – for the Maryland Economic Development Assistance Authority and Fund (MEDAAF), one of the state’s most powerful tools to attract and grow business.
An increase of $3.3 million, or nearly 25 percent, for the Small, Minority, and Women-Owned Business Investment Account, which provides financing opportunities to small businesses. It is now funded at $17 million, its highest level ever.
$7.8 million for business assistance through the Maryland Small Business Development Financing Authority to facilitate the development of Maryland’s small businesses.
Doubling the state’s investment in the nationally recognized Employment Advance Right Now (EARN) program from $4 million to $8 million. New state funds of $1 million will be used to award partnerships focused on workforce training for Tier One green industries. $3 million will go to increase the number of training partnerships across Maryland in the cybersecurity and information technology fields.

Tourism and the Arts:
An all-time high of $21 million to the Maryland State Arts Council, which provides grants, technical assistance, and other support services for the arts.
A combined total of $11.9 million for the Office of Tourism Development – the state’s official marketing agency – and the Maryland Tourism Development Board to stimulate and promote travel and tourism in Maryland.

Building for the Future – Transportation & Infrastructure:
$2.8 billion in capital spending to improve transportation infrastructure and promote economic development.
$175.5 million in formula Highway User Revenue funds, including $53 million in capital grants to local jurisdictions to improve local roads and transportation facilities.

Treatment, Safety, and Correctional Services:
The FY 2018 Medicaid budget contains $1.3 billion for mental health and substance use disorder services.
$159 million dedicated to existing non-Medicaid substance use disorder treatment programs.
$4 million in new funding will bolster the state’s effort to help those struggling with heroin and opioid addiction.
An increase in the number of treatment beds for substance abuse patients of 50% over the previous administration.
Local law enforcement grants total $29.4 million in FY 2018, including an additional $2 million for a new Internet Crimes Against Children grant program and $500,000 for the new Community Program Fund to assist local jurisdictions in establishing violence intervention programs.

Protecting the Environment:
$51.3 million to The Chesapeake and Atlantic Coastal Bays 2010 Trust Fund.
Programs funded by the transfer tax, such as Program Open Space, receive $186 million, an increase of $63.8 million from FY 2017 to FY 2018.
Natural Resources Police will receive $1.9 million for 17 new law enforcement officer positions to support enforcement of conservation and natural resource laws and promote safety on our public lands and waterways.
In keeping with the Hogan administration’s commitment to provide an additional $2 million per year to the Rural Maryland Prosperity Investment Fund through FY 2019, $4 million is allocated in FY 2018 to provide targeted funding to regional councils, infrastructure projects, rural entrepreneurship, and rural community development.

Health Care and Public Safety Net:
The FY 2018 budget includes more than $11 billion for Maryland’s Medicaid program, which currently provides health coverage for more than 1.3 million Marylanders.
An additional $79 million in FY 2018 funds a 2 percent rate increase for most health care and group home providers, including $22 million for the Developmental Disabilities Administration to benefit direct care workers serving some of Maryland’s most vulnerable residents.
$7.4 million for two new waiver programs aimed at reducing the Waiting List for Developmental Disabilities Administration (DDA) services. Building on existing efforts, these new waivers will allow DDA to extend services to an additional 400 Marylanders with disabilities.
Continued operating and capital assistance is provided in FY 2018 for the new Prince George’s County Regional Medical Center in Largo.