Maryland’s financial trajectory has taken a dramatic turn under Governor Wes Moore, shifting from a $5.5 billion surplus in early 2023 to a projected $3.3 billion deficit in 2025. If spending trends continue, the structural deficit could balloon to $6.2 billion by 2030. How did the state find itself in this predicament?

From Surplus to Shortfall: What Happened?

In 2022, Governor Hogan left Maryland with a $5.5 billion general fund surplus—$3 billion in the rainy-day fund and a $2.5 billion structural surplus, fueled partially by federal COVID relief funds and unexpectedly strong tax revenues. However, under Governor Moore, spending commitments began to outpace revenue growth. By the end of FY 2023, Maryland still had a modest $555 million surplus, but projections warned of a $418 million deficit in early 2025 and a growing shortfall reaching $1.8 billion by 2028. In December 2024, officials then projected a 2.5 billion deficit and by January 2025, the projected deficit had risen to $3.3 billion, prompting a budget framework agreement that included $1.6 billion in tax hikes and $2.3 billion in spending cuts.

Where Did the Money Go? The Budget's Biggest Drains

Several costly programs played a significant role in depleting Maryland’s surplus:

• The Blueprint for Maryland’s Future – This ambitious education reform plan, also known as the Kirwan Plan, mandates universal and free pre-K for three- and four-year-olds, among other measures enhancing recruitment of educators and teachers and providing additional support for at-risk students and underserved populations. Implementing the Blueprint costed $1.6 billion in fiscal year 2024 and is projected to grow to $4.1 billion yearly within five years according to the Department of Legislative Services. The total cost of implementing the Blueprint is projected to be approximately $30 billion over the first 10 years.
• Medicaid Expansion – While providing necessary healthcare for low-income residents, Medicaid costs have skyrocketed. In FY 2024 alone, spending reached $14.6 billion.
• Childcare Subsidies – A $270 million expansion of childcare subsidies added another financial burden.
• Environmental Initiatives – Maryland has committed an additional $1 billion annually to environmental programs.
• New State Agencies – The creation of offices like the Department of Service and Civic Innovation By Governor Moore added tens of millions to long-term spending. For Fiscal 2025, its budget increased $31.8 million, or 131.4%, to $56 million.

Maryland committed to these programs without identifying sustainable funding sources. Additionally, Blueprint for Maryland's Future mandates certain expenditures, leaving little room for flexibility in how funds are allocated which leads to the current fiscal scramble.

The Solution? Tax Hikes

To address the deficit, Governor Moore proposed a $67.3 billion budget that includes $1.6 billion in tax increases and $2.3 billion in spending cuts. However, details over those 2.3 billion cuts remain scarce, with concerns that they might be little more than raids on the state’s remaining rainy day fund. Will these cuts truly address the state's underlying fiscal issues?

Key tax increases include:

• Income Tax – Higher tax rates on income above $500,000, impacting households and small businesses structured as pass-through entities such as LLCs. A new rate of 6.25% applies to individuals with incomes exceeding $500,000 (or $600,000 for married couples), and 6.5% for individuals earning over $1 million.
• IT Service Tax – A 3% sales tax applied on Information Technology services and other professional services that will hit every consumer, that is every individual purchasing IT and data consulting services.
• Capital Gains Tax – A new 1% tax on capital gains for individuals earning over $350,000.
• Other Taxes – Tax increase on gambling, online sports betting, and cannabis.

These tax hikes won’t just affect the wealthy, they will also raise costs for small businesses and middle-class families, potentially slowing economic growth.

Blaming President Trump?

Pointing out the negative outlook noted by ratings agency Moody’s, Maryland Governor Moore and other leaders have blamed President Trump, mentioning federal workforce cuts, trade wars (an alleged $2 billion impact), and plans to cancel relocating the FBI headquarters to Maryland, which would further hurt Maryland's economy.

However, Maryland's budget struggles existed long before President Trump returned to office in January 2025. Nevertheless, Democrat leaders in Annapolis refuse to take one bit of accountability. Part of the problem is that the federal government is on longer sending those COVID relief packages to Maryland, like it did in the past, with the American Rescue Plan and the CARES Act but the state should have prepared accordingly, and our Governor should have been more fiscally responsible when he proposed his budget.

The state now faces a stark choice: implement real spending cuts or continue raising taxes. Unfortunately, raising taxes is often the easiest option politically. If Maryland fails to rein in spending, both businesses and families will bear the financial consequences. The surplus is gone, and now, Marylanders must prepare to shoulder the costs.

The Bottom Line

Maryland’s budget crisis is like a household that received a large bonus, spent it all on luxury upgrades, and is now struggling to pay the mortgage. Instead of cutting unnecessary expenses and expenses we truly cannot afford, the state is asking taxpayers to cover the shortfall. Without serious fiscal discipline, Maryland will continue down a path of increasing deficits and heavier tax burdens.

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Helene Meister is a former candidate for the House of Delegates from District 17 and a member of the Montgomery County Republican Central Committee.