Maryland Dodges Immediate Financial Fallout from Federal Job Cuts

Maryland has managed to evade significant immediate financial repercussions from the federal government’s decision to terminate thousands of federal jobs, according to state officials. During a meeting on Thursday, the Maryland Board of Revenue Estimates revealed a largely stable forecast for state tax collections over the next few years, providing a temporary sense of relief amidst ongoing uncertainties.

“This actually feels like a big win for us,” stated Comptroller Brooke Lierman. Despite the positive outlook, Lierman emphasized that the state has already lost over 15,000 federal jobs, with the possibility of that number rising significantly. The long-term impacts of these job losses, coupled with shifts in federal policies, remain a concern for Maryland’s economy.

“There’s no question that we will see the effects of federal policy changes, job reductions, and spending cuts,” Lierman remarked. “The question is when those effects will materialize and the degree of the impact.”

The financial landscape in Maryland is already feeling the strain. The recent tax cuts implemented under President Donald Trump are projected to cost the state $189.3 million in revenue over the next two years. This reduction has influenced the Board’s estimates, which now predicts a slight decrease in tax collections for the current fiscal year 2026, which ends next June. The revised revenue figure stands at $26.6 billion, representing a drop of $19 million from earlier estimates.

Looking ahead, the board forecasts a modest increase to $27.1 billion for fiscal year 2027. This projection will be critical as Governor Wes Moore and state lawmakers prepare to draft the upcoming budget during the annual session beginning in January. A further revenue update is expected in December, which will provide additional context for budget planning.

In the wake of a significant $3.3 billion budget deficit that constrained policymaking at the start of the year, state officials are cautiously optimistic about a more stable financial situation moving into 2026. The anticipated revenue increase includes about $1.3 billion from new taxes, which has drawn criticism from some political leaders.

“Our state’s fiscal picture looks ‘OK’ right now for one simple reason — Democrats in Annapolis raised taxes and fees on hardworking families and small businesses in the last legislative session,” stated Senate Minority Leader Steve Hershey. He criticized the lack of substantive reforms to control spending and promote economic growth, arguing that a budget reliant on higher taxes indicates weakness rather than strength.

In contrast, Treasurer Dereck Davis, a member of the Board of Revenue Estimates, defended the tax increases as necessary to maintain vital state services. “Everything that we do is benefiting someone in the state of Maryland, if not everyone in the state of Maryland,” Davis explained.

A positive development for Maryland has been the unexpected rise in personal income tax collections. For the fiscal year ending June 30, revenues surpassed estimates by $520.7 million, bolstered by strong performance from higher-income taxpayers. This surplus has resulted in a balance of $460 million, allowing for a deposit of $382.3 million into reserve funds.

Despite this encouraging data, officials remain vigilant about the looming impacts of federal job losses, changes in healthcare policies, heightened immigration enforcement, and tariffs. According to Robert Rehrmann, executive secretary of the Board of Revenue Estimates, the more than 15,000 federal jobs lost in Maryland account for approximately one-sixth of all federal job losses under the Trump administration. This number is expected to reach around 25,000 by year’s end, although the final count remains uncertain due to deferred resignation offers.

As job losses continue, Rehrmann warned that Maryland’s overall economy will likely face challenges. “There’s no doubt that our labor market has slowed,” he said, indicating that the full extent of these impacts will become clearer with more data expected by March 2026, coinciding with the next legislative session.

The evolving economic situation in Maryland underscores the intricate relationship between federal policies and state financial health, prompting ongoing scrutiny and proactive measures from state leaders.