Maryland: Fiscal Challenges Presented at Advocating for Maryland Values June 8, 2017

The 2017 Session Significant revenue write-downs after the 2016 legislative session resulted in the need to act to balance the fiscal 2017 and 2018 budgets The fiscal 2017 budget was balanced primarily by $82 million in November Board of Public Works savings $170 million transfer from the Rainy Day Fund Not spending $88 million in funding restricted by the legislature for various purposes

2017 Session (Continued) The fiscal 2018 budget was balanced through a combination of reductions made by the Budget Reconciliation and Financing Act (BRFA), for example to supplemental pension contributions, to mandatory contributions to the Rainy Day Fund, and deferring certain mandates enacted in the 2016 session Budget balancing was made easier by favorable caseload trends (e.g., public safety and Temporary Cash Assistance), little increase in State employee costs (no raises or cost­-of-living adjustments, available health insurance fund balance, and lower retirement contributions), and low inflation (limiting formula growth) While the fiscal 2018 budget was balanced, little was proposed and nothing was adopted that significantly helped the projected structural budget shortfall in the out‑years

Projected General Fund Structural Deficit Exceeds $1 Projected General Fund Structural Deficit Exceeds $1.5 billion by Fiscal 2022

Most of the General Fund Budget Is Mandated or for Entitlements ($ in Millions)

Mandates and Entitlements In fiscal 2017, almost $6.0 billion (72%) of total general fund mandated funding was in K-12 education, including the foundation program, compensatory education, and teacher retirement payments Other significant mandates include State employee retirement contributions, support of the Judiciary, and Debt Service The largest area of general fund entitlement funding is Medicaid, $3.5 billion (92%) of total general fund entitlement spending

Medicaid Coverage Has More Than Doubled in the Past Decade ACA: Affordable Care Act PAC: Primary Adult Care MCHP: Maryland Children’s Health Program YTD: year-do-date

Medicaid Spending Will Consume More of the General Fund

Uncertainty at the Federal Level Maryland’s economic health is disproportionately tied to federal actions Federal Government Employment As a Percent of Total Employment

Federal Uncertainty Continued Federal Government Wage Income As a Percent of Total Wage Income Calendar Years

Fiscal 2018 Budget Includes $13 Billion in Federal Funds SNAP: Supplemental Nutrition Assistance Program

American Health Care Act as Passed by the House Has Significant Budget Consequences ACA: Affordable Care Act GF: general funds

Moving Forward Maryland is facing a sizable budget gap in fiscal 2019 Solutions are expected to be broadly similar to those used in fiscal 2018 – for example, holding down employee compensation and use of the BRFA to reduce mandates and authorize the transfer of dedicated funds to other purposes Uncertainty at the federal level could impact overall economic picture and potentially have significant budgetary impacts if not in fiscal 2019, then beyond