State Budget Practice Report Cards and Budget Resource Guide

Maryland enjoys triple-A general obligation bond ratings from Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings. While the scores reflect the state’s perceived risk of default, they don’t fully account for fiscal trouble spots if revenues should flag.

For instance, take Maryland’s average grade of D, the second-lowest mark possible, for its handling of legacy costs for fiscal 2016 through 2018. The mark resulted largely from the underfunding of other postemployment benefits (OPEB) for public workers, mainly health care. Maryland has two OPEB plans, the State Employee and Retiree Health and Welfare Benefits Program and the Maryland Transit Administration Retiree Healthcare Benefit. In fiscal 2013 through 2017, the state contributed an average of 71 percent of the annual contribution recommended by actuaries to the former and an average of 21 percent to the latter. In addition, as of 2017, Maryland set aside only 68.6 percent of assets needed to meet public worker pension obligations, the same funding level as the total for US states.

The state’s C average in reserve funds reflects a paucity of policies governing rainy day funds. As long as 5 percent of estimated general revenues remain in the fund, the governor can appropriate money from it, although the General Assembly can reduce any withdrawals by cutting the budget. 

Maryland’s strongest performance was in budget forecasting, where it received an A average. The state uses consensus revenue forecasts and develops multiyear estimates for expenditures and revenues—potent tools for helping it prepare for events affecting money it collects or spends.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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