Maryland’s State Budget is teetering on the brink of an unprecedented financial collapse. The refusal to address formula-driven mandatory and entitlement spending threatens to thrust the state into a cycle of automatic “runaway” deficits, culminating in a financial “Extinction Level Event” in the near future. Despite the gravity of this crisis, political leaders have shied away from the structural reforms necessary to restore fiscal stability. Without bold action, Maryland’s taxpayers face a perilous future.
At the heart of Maryland’s fiscal woes is the rigid structure of formula-driven mandatory spending. These formulas mandate funding levels for key programs, such as education and Medicaid, irrespective of the state’s revenue performance.
The failure to redefine and adjust the mandatory and entitlement spending based on economic realities is not a trivial oversight; it is a catastrophic misjudgment that will surely lead to a financial collapse from which there is no recovery. The state’s budget will collapse under its own weight—not due to inadequate taxation, not by trimming the discretionary budget, but because of otherwise well-meaning mandatory spending formulas whose costs become prohibitively unsustainable as they approach reality. Senate President Bill Ferguson underscored this reality, acknowledging that entitlement programs constitute the bulk of the growing deficit. Yet, political leaders have made little progress in reforming these spending mandates.
The illusion of fiscal health under the Hogan administration was largely sustained by federal COVID relief funds, which artificially created budget surpluses. These one-time funds masked the structural deficit and deferred difficult financial decisions. However, with the federal COVID money now evaporated, the true extent of Maryland’s budgetary challenges has come into sharp focus. Moreover, the upcoming Trump administration is likely to scale back discretionary federal spending, which has traditionally bolstered Maryland’s economy due to its reliance on federal contracts and agencies. This reduction in federal support will further exacerbate the state’s financial challenges, leaving Maryland ill-prepared to weather the storm.
Another significant drain on the state’s resources is Governor Moore’s commitment to “climate investments.” While addressing climate change is a noble goal, it is fundamentally a national and global issue, not a state-specific one. Maryland’s taxpayers should not be saddled with debt for initiatives that will have a de minimus impact on global climate trends. Prioritizing these expenditures over addressing the budget crisis is fiscally irresponsible and diverts attention from urgent structural reforms.
The recent Gonzales Poll reveals that a majority of Marylanders oppose tax increases to address the budget deficit. More than three-quarters of respondents oppose increases in income, property, and sales taxes. Even among those who strongly approve of Governor Moore’s performance, a significant majority oppose new taxes. This opposition underscores the political peril of pursuing tax hikes without first addressing the state’s spending problem.
While commendable as a good first “baby step”, Governor Moore’s recent proposal to save $50 million through government efficiencies is a drop in the ocean compared to the nearly $3 billion deficit – a deficit that is projected to double by 2030. While symbolic gestures like streamlining laptop procurement and reducing underutilized state vehicles are commendable, they fall far short of the comprehensive restructuring needed and do nothing to adjust mandatory spending.
The Moore Administration’s reliance on outside consultants, such as Boston Consulting Group, further diminishes the credibility of these efforts. Not only will the consulting firm receive 20% of any identified savings, but this agreement could cost taxpayers up to $15 million over two years. This expenditure – which has been billed as a measure to save money- epitomizes the mismanagement of resources that has plagued the state.
In a December 11, 2024, opinion article in Center Maryland, I called upon Governor Moore to “reorganize Maryland’s bloated bureaucracy” for the first time in over 50 years before considering tax increases. This reorganization should include revisiting mandatory spending formulas, recalibrating spending mandates to align with the state’s fiscal realities, addressing unfunded pension liabilities that loom like a ticking time bomb, and eliminating redundant programs through a thorough review of state operations. Recent proposals that have been quietly suggested by legislative leaders such as Senate President Bill Ferguson – such as raising the capital gains tax – fail to address the structural deficit and punish success, should be outright rejected.
Maryland is at a crossroads. The state’s leaders must confront the hard truths about its fiscal trajectory and embrace meaningful reforms. Without immediate decisive action, the combination of formula-driven spending, evaporating federal support, and misplaced priorities will lead Maryland toward a financial catastrophe. The time for half-measures is over; the state’s fiscal survival depends on bold, transformative leadership.
Clayton A. Mitchell, Sr. is a lifelong Eastern Shoreman, attorney, and former Maryland Department of Labor’s Board of Appeals Chairman. He is co-host of the Gonzales/Mitchell Show podcast, which discusses politics, business, and cultural issues.
Bill Anderson says
Mr. Mitchell, I am sure that your take on the future of Maryland’s fiscal policy is absolutely correct. Governor Moore, like most if not all previous Democrat Governors, hold a view of distributing money to constituents through various state programs and mandates. Generally, those programs live long lives rather than simply dying at a specific short-term existence. Thus, there goes the money, year after year.
Hiring a consultant to examine one’s fiscal policies and position makes political, if not financial sense. When said consultant recommends spending cuts, tax and fee increases or other adjustments which may prove unpopular, a governor and legislative body can defend their actions as being viewed as essential to the state’s economic future.
Either way, it is obvious that the state needs to take action — real action — to avoid a very sad situation in the short-term.
CLAYTON A MITCHELL SR says
Thank you for your comment and feedback. It is a sad situation. Many these days in Annapolis do not understand the basic tenants of economics. Let’s keep the faith and keep fighting!
Nancy McGuire says
Critical thinking and common sense.
Hmm. How novel!
Thank you.
CLAYTON A MITCHELL SR says
Thank you!
Mike Waal says
Mr. Clayton A. Mitchell, Sr., et al, the Maryland State Budget Deficit has been years, if not decades, in the making. Anyone with an acute sense for the obvious knows this.
I recently sent a letter to Gov. Moore, copy below. Gov. Moore has to turn this aircraft size state around on a dime right now, as waiting for more slow moving bureaucratic inefficient committees is not going to help Maryland’s unsustainable appetite for unfunded mandates levied on Maryland taxpayers. We don’t have a revenue problem. We have a spend problem. And Gov. Moore must get Ferguson and Jones on board and follow his lead. For Gov. Moore to have any chance at a future Presidency, fixing Maryland’s deficit is a priority.
I should have added one more item in my list of ‘going into 2025’ … MD has the 3rd highest corporate tax rate in our Econ Dev region.
– – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
January 1, 2025
The Office of Governor Wes Moore
100 State Circle, Annapolis, MD 21401
Subject: How high is a ‘high bar’ for taxes?
Dear Governor Moore,
I trust this correspondence finds you and your family well, having enjoyed a Blessed Holiday and joyous New Year celebration.
I also trust this correspondence finds its way to your desk, realizing a staff member will be reviewing it for relevance.
The purpose of my correspondence is to ask how high is a high bar for taxes with the state’s deficit standing at $3Billion, which is not new news, increasing exponentially in out years? And to discuss what the consequences are of increasing taxes and fees, and potentially creating new ones.
As we know, last year during the 2024 Gen Assy session we saw increases in 335 fees and taxes due to the looming structural budget deficit a year ago. While individually incremental, cumulatively it generated a fair amount of revenue. We also know that ultimately these fees and tax increases will find their way down to increases in the cost of doing business, and ultimately impact the prices consumers pay for products and services.
CEO Magazine just recently came out with their latest survey for the 2024 best & worst states for business.
So, going into 2025, not only does Maryland have:
the 5th highest gas tax in the nation, which is automatically increased via CPI, and not very business friendly;
the 5th highest minimum wage in the nation, which is not very business friendly, but justified as Maryland is …
the 5th highest cost-of-living state in the nation, which is also not very business friendly;
but Maryland is CEO Magazine’s 35th worst state for business.
This is not the first time Maryland has ranked poorly in a ‘best & worst states for business’ ranking, as we know, similar rankings have been published by Forbes, CNBC and Wallet-Hub.
Business owners and decision making managers read this. They are knowledgeable and have spread sheets full of other decision making data and metrics; like the cost of land, construction, permits, and the permitting process; the cost of doing business, like corporate taxes, labor, overhead, G&A expenses, which impacts their state viability check-off list and ultimately their decisions on where to move a business, expand a business, start a business. We know the private industry sector has been stagnant in MD for some time. This latest ranking does not, obviously, help Maryland’s situation.
CEO Magazine’s ranking of the best-to-worst states in our Econ Dev region:
5th – North Carolina*
10th – South Carolina*
12th – Virginia
15th – Delaware
31st – Pennsylvania
34th – West Virginia
35th – Maryland
47th – New Jersey
[*I include NC & SC because of their $7.25 minimum wage, which is justified given their cost of living.
NC & SC are Econ Dev magnets and not that far away.]
Page 2
CEO Magazine’s ranking of the best-to-worst states along the I-95 corridor from Maine to Florida:
2nd – Florida
5th – North Carolina
7th – Georgia
10th – South Carolina
12th – Virginia
15th – Delaware
24th – New Hampshire
31st – Pennsylvania
33rd – Maine
35th – Maryland
36th – Rhode Island
42nd – Connecticut
45th – Massachusetts
47th – New Jersey
49th – New York
If you, as Wes Moore not Governor Moore, were thinking about moving your business to, expanding your business to, or starting a new business on the DELMARVA, where I live, where would you put it?
Let’s expand that to thinking about moving your business to, expanding your business to, or starting a new business in the greater Mid-Atlantic region, where would you put it?
Let’s expand that even further to thinking about moving your business, expanding your business, or starting a new business along the I-95 corridor, where would you put it?
Applying common sense and logic to the data, as you and I would, and with an acute sense for the obvious, Maryland would not make it to our short list of states to be considered.
One can only hope the 2025 Gen Assy, lead by Senate President Ferguson and House Speaker Jones, does not dig the hole Maryland is in any deeper, as neither raising fees and taxes, regardless of how high the bar, nor creating new ones, is going to entice corporations to move here, expand here, start new here.
Given that income tax is one of the main revenue sources for the state, along with corporate taxes, with 10% of Maryland’s workforce being Fed based, and likely to see that reduced, plus not being considered business friendly, well, there you have it.
We have been a spend and tax state for decades, legislating into being a number of very expensive unfunded mandates [the elephant in the room right now being The Blueprint/Kirwan] well before you and Hogan came into office; both of you inherited this fiscal mess.
Frankly, your recent Executive Order to bolster Maryland’s economic competitiveness surprised me; while idealistic, it is not pragmatic with a sense of immediacy and urgency. On the contrary, rather it is more layers of slow moving bureaucratic inefficiency.
Maryland needs to reduce spending now, live within our means now, albeit not raise fees and taxes to balance our budget now, and become more business friendly now.
I urge you, Governor Moore, to take the leadership role I admire you for and get our fiscal house in order.
With kind regards, and best wishes expressed for your continued success,
Mike Waal
Past Director of Economic Development, Kent County
Past President of the Chamber of Commerce, Kent County
Past Advisory Board Member WIB
CLAYTON A MITCHELL SR says
Great Letter! Keep the faith and keep fighting!