Maryland

State Budget Practice Report Cards and Budget Resource Guide

Maryland is one of twelve states to enjoy a top AAA bond rating from the three leading US credit rating companies. The rating indicates that the risk of default on the state’s general obligation debt is deemed to be low. Yet like its eleven peers, Maryland has weaknesses in its budget procedures that may leave it vulnerable to fiscal shocks caused by recessions.

For example, in budget maneuvers—the use of one-time actions to plug gaps and achieve balance—Maryland received a C average grade for fiscal 2015 through 2019. In 2015–17 it used several maneuvers, including paying operating expenses with debt, and in 2018 it began to defer some recurring expenditures to future years. In 2019, the state put off a mandated $15 million expense for its Program Open Space, which provides assistance to localities for development of recreational areas.

In legacy costs, which include public employee pensions and other postemployment benefits (OPEB), principally health care, the state also averaged a C. In the five years studied, Maryland funded OPEB in line with actuarial recommendations only once, in 2018. By contrast, the state made actuarially determined pension contributions every year from 2016 through 2019; its 2019 pension funding ratio of 72 percent was 1 percentage point above the total for all states.  In 2016 its pensions were 65 percent funded.

The state fared best in budget forecasting, with a top A average. It produces multiyear forecasts for expenditures and revenues, has a consensus revenue forecasting process, and provides explanations for revenue growth projections, including information about assumptions that went into the estimates.

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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 2021 Volcker Alliance report, Truth and Integrity in State Budgeting: Preparing for the Storm, 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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