The Board, which includes Comptroller Brooke Lierman, Treasurer Dereck Davis, and Department of Budget and Management Secretary Helene Grady, approved general fund revenues of $26.67 billion in fiscal 2026, just a 3.6% increase from fiscal 2025. That’s a $19 million write-down from March.
For fiscal 2027, revenues are projected at $27.13 billion, only 1.7% growth over the prior year. By contrast, fiscal 2025 revenues grew 4.1% over fiscal 2024.
Drivers Behind the Write-Down
Personal Income Tax
FY25 finished strong, with collections coming in $264 million above estimate — a 7% gain — primarily driven by capital gains realizations. But that momentum doesn’t last.
Growth slows to 5.3% in FY26 and then drops further to just 2.2% in FY27 as wage growth moderates and the first wave of federal job cuts reduces withholding.
Corporate Income Tax
Corporate revenues fell $47 million short in FY25. The picture worsens in FY26, with collections dropping another $147 million (-4.5%) as companies accelerate deductions under federal law. Revenues fall again in FY27, down another 2.4%.
Sales and Use Tax
Sales tax rose modestly in FY25, up $72 million (2.6%). However, the new forecast reduces FY26 by $35 million, despite the expansion into digital and IT services. Looking forward, sales tax growth hovers between 2 and 5% a year — well below historic averages.
Other Revenues
“Other” revenues tell a story of volatility. They surged by $231 million in FY25, driven by unclaimed property and other miscellaneous sources. However, in FY26, they are forecast to decline by $126 million (-10.9%), underscoring the unreliability of these categories for ongoing budget planning.
Structural Deficit Outlook
As previously reported on Conduit Street, the Department of Legislative Services projects deficits beginning in FY27 and growing to nearly $3.6 billion by FY30.
The 2025 Budget Reconciliation and Financing Act is expected to raise approximately $1.3 billion per year starting in FY26; however, weaker income and corporate revenues are already offsetting much of that gain.
Meanwhile, the federal “One Big Beautiful Bill” reshapes personal and corporate tax flows. It creates short-term losses before adding projected gains later in the decade. Together, these changes leave Maryland with a revenue base that fluctuates more widely, just as spending pressures continue to rise.
Federal Headwinds: Job Cuts and Shutdown Risk
The economic backdrop makes the forecast even more challenging.
- Federal job losses: Maryland has lost more than 15,100 federal jobs since January, accounting for one out of every six federal positions cut nationwide this year. Those jobs pay well above average private-sector wages, so the losses ripple through both household incomes and State revenues.
- Labor market slowdown: Employment growth in Maryland and the Washington region has turned negative in several metro areas. Wage growth is slowing, and withholding receipts are expected to weaken through 2026.
- Shutdown threat: Congress faces another looming deadline. Federal employees typically get back pay, but contractors do not. A prolonged shutdown would stall contract dollars, impact local restaurants and small businesses, and dry up revenue streams.
County Takeaway
Counties share the same exposure to volatile personal income tax revenues as the State. The FY25 surplus proved how much capital gains and one-time factors can swing the numbers — but those gains don’t last.
With structural deficits set to open in FY27, counties face the real possibility of cost shifts or cuts to State aid. At the same time, federal retrenchment adds more instability. Losing federal jobs, contracts, and grants undermines Maryland’s economy and puts additional pressure on local budgets.
Counties will continue pressing for a stable State–local fiscal partnership that avoids unfunded mandates and preserves the ability to invest in schools, public safety, infrastructure, and community needs.
