By Michael Phillips | MDBayNews
Maryland officials are touting a modestly improved revenue forecast as a sign of stability. But scratch the surface, and the numbers tell a far less reassuring story.
On December 13, the state’s Board of Revenue Estimates (BRE) announced a slight upward revision in projected revenues: about $45 million more for the current fiscal year (FY 2026) and just $9.1 million more for FY 2027, bringing next year’s estimate to roughly $27.1 billion. The adjustment was described by board staff as a “recalibration,” not a reversal of fortune.
That framing matters—because Maryland is staring down a projected $1.4–$1.5 billion structural deficit in FY 2027, with forecasts showing the gap growing to $3–$4 billion later in the decade. Against that backdrop, a $45 million uptick amounts to fiscal pocket change.
Volatile Gains, Weak Fundamentals
The additional revenue is driven largely by higher personal income tax collections, particularly from capital gains—one of the most volatile and economically sensitive revenue sources the state relies on. At the same time, sales taxes and corporate income taxes are softening, a signal that consumer spending and business activity may be cooling.
That combination should concern taxpayers. Capital gains surge during good times and evaporate quickly during downturns. Basing long-term spending commitments on short-term investment income is a risky strategy, especially as economists warn of slowing growth and potential recessionary pressures.
Even Comptroller Brooke Lierman, who chairs the board, acknowledged the fragility of the situation, pointing to what she called a “K-shaped economy” where high earners do well while many households struggle with housing, food, and childcare costs. Median income may top $100,000 in Maryland, but affordability remains a serious issue.
The Spending Side of the Ledger
What remains largely unaddressed in much of the mainstream coverage is the spending side of Maryland’s fiscal imbalance.
The largest driver is the Blueprint for Maryland’s Future, the sweeping 10-year education reform law passed over then-Gov. Larry Hogan’s veto. While supporters describe it as a necessary investment, even official state projections now show Blueprint costs accelerating far beyond original estimates.
According to the Department of Legislative Services, state education aid is projected to rise by nearly $9 billion between 2025 and 2030, with Blueprint costs alone consuming billions annually from the general fund once dedicated revenue streams are exhausted. By the early 2030s, education mandates could require $3–$4 billion per year in general fund support.
This isn’t a temporary problem. It’s a structural one.
Taxes Went Up. The Deficit Came Back.
Just last year, Maryland lawmakers approved roughly $1.6 billion in new taxes and fees, including higher vehicle fees and changes affecting capital gains. Those measures were sold as necessary to stabilize state finances.
Yet here we are again, facing another billion-dollar gap—proof, critics argue, that higher taxes didn’t solve the problem so much as enable higher spending.
Governor Wes Moore has pledged no new tax increases for FY 2027, which means lawmakers will face real choices in the 2026 legislative session: spending cuts, program reforms, or tapping reserves. House leaders have already warned against heavy use of the state’s rainy-day fund, noting risks to Maryland’s bond rating and borrowing costs—concerns underscored by Moody’s 2025 downgrade of Maryland’s credit outlook.
Accountability in a One-Party State
For center-right and fiscally cautious observers, this moment raises a broader question: Who is accountable when one party controls the governor’s office and veto-proof legislative majorities?
Maryland enjoyed surpluses in recent years, thanks in part to federal pandemic aid and restrained spending growth. Today’s deficits are not the result of a single bad forecast or federal policy shift, but of long-term commitments that outpaced sustainable revenues.
A $45 million revenue bump doesn’t change that reality. It simply delays the reckoning.
The Bottom Line
Marylanders deserve honesty about what lies ahead. The state’s fiscal challenges won’t be solved by optimistic press releases or marginal forecast adjustments. Without serious scrutiny of spending mandates—and a willingness to reform or pause those that are driving long-term deficits—the cycle of tax hikes followed by shortfalls will continue.
The 2026 session is shaping up to be a test of whether state leaders are willing to confront hard truths—or whether they’ll keep celebrating small bumps while the fiscal hole gets deeper.
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