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About Budget

Executive Budget Development
  • Development of the budget is primarily an executive task. The Governor formulates the budget and supplemental budgets. The Department of Budget and Management (DBM) supervises the executive budget-making process.
  • The process begins in the summer prior to the start of the budget year. At this time, DBM develops budget instructions for use by agencies in preparing their budgets and develops a maximum agency request ceiling (commonly referred to as a target) for each agency. The request ceiling limits the amounts of State funds an agency may budget. The ceiling attempts to tailor the amount requested to the funds available while providing some flexibility to the Governor. The ceiling may or may not reflect amounts needed to:
    • maintain current services;
    • support operations of new facilities;
    • implement enacted legislation; and
    • annualize programs initiated in the current budget year.
  • Agencies are directed to submit budget requests to DBM on a staggered basis throughout the fall of each year. Agencies may also request additional funds for new or expanded programs "over the target" or above the amounts needed to maintain current services. Throughout the fall, DBM staff review agency requests and "over the target" items and make recommendations to the Governor.
  • Final decisions on the budget are not typically made until the new year. This is because the Board of Revenue Estimates does not report its estimate of revenues to be available for expenditure in the budget year until mid-December. In addition, the legislature's Spending Affordability Committee, which advises the Governor as to its spending limit, reports in December.
  • The amount the Governor determines should be included in the budget bill becomes the Governor's Allowance when the bill is introduced.
Legislative Introduction

The budget, or Governor's Allowance, must be submitted by the third Wednesday in January or by the 10th day of session if it is the first year of a new term of office. The budget bill is introduced in both chambers and contains:

  • appropriations for each agency by fund source for the next fiscal year;
  • deficiency appropriations (which provides additional funding for expenses in the current fiscal year) by fund source;
  • salary detail listing the grade, step, and salary for positions in the flat rate and executive pay plans; and
  • additional sections that pertain to the entire budget.

The Governor must submit a balanced budget to the legislature in January of each year for consideration. The budget may be balanced assuming proposed revenue that currently is not being collected by the State and reductions to mandated funding contingent on the enactment of separate legislation altering the mandated funding.

Legislative Consideration and Action on the Budget
  • The amounts in the Governor's Allowance may be altered by legislative action to reduce or restrict particular appropriations. The legislature may also add or increase funding for particular purposes as long as the total appropriation does not exceed the proposed appropriation submitted by the Governor for that fund source. After introduction of the budget but before final action on the budget, the Governor may reduce or increase the budget through introduction of a supplemental budget.
  • Supplemental budgets permit the Governor to correct errors or omissions in the original budget and are used to appropriate new spending. Although customarily accepted, supplemental budgets may only be attached to the budget by consent of the legislature.
  • Appropriations for debt service, statutorily mandated support for public schools, and salaries in effect for constitutional officers may not be reduced. Mandated funding for any program can be reduced, although funding related to primary/secondary education programs required by statute can only be reduced in conjunction with changes to statutory programs via separate legislation.
  • For each legislative session, the House and Senate alternate which chamber will move the bill.
  • Legislative procedures include:
    • subcommittee hearings;
    • subcommittee decision meetings to adopt actions;
    • subcommittee reports to the full committee;
    • full committee decisions;
    • passage and consideration by both chambers; and
    • conference committee.
  • After passage of the conference committee report by both chambers, the budget is presented to the Governor for review. The Governor may line-item veto items relating to the Executive Branch that have been increased or added by the legislature. The Governor may not veto items that were unamended or reduced by the legislature. Passage of the budget bill in April allows access to deficiency appropriations in the current fiscal year.
  • The legislature must complete action on the budget by the 83rd day of session. If this does not occur, the Governor issues a proclamation calling for an extended session should the budget not be enacted by the 90th day. If the legislature goes into extended session due to the budget not being passed by the end of the 90th day, all other legislation fails. Only the budget bill may be considered during an extended session.
  • In addition to budget action, the legislature may increase State spending through a supplementary appropriation bill. Under this legislation, the legislature raises a tax and directs its revenues to a particular purpose. Supplementary appropriations may only be considered after enactment of the budget bill and are subject to veto. The capital budget bill is considered a supplementary appropriation bill.
  • The budget has the force of law for only one year, while it is in effect during the fiscal year that runs from July 1 to June 30 each year.
  • If revenues or changes to mandated spending levels are needed to pass a balanced budget, the Governor or the legislature may consider a reconciliation act. The reconciliation act is not subject to the same rules as a budget bill and typically is considered at the same time the budget is considered. They have been used frequently in recent years as the State continues to face budgetary challenges.
Budget Implementation
  • Final action in the enacted budget establishes the legislative appropriation for each budgetary program. For practical purposes, this refers to the amount of funding as of the first day of the fiscal year, or July 1 in Maryland.
  • The Governor may alter appropriations in agency budgets in the course of the fiscal year by budget amendment. Once amended during the fiscal year, the legislative appropriation becomes the working appropriation. The following general rules apply:
    • Funds may not be transferred from one agency to another unless specifically authorized by law or general funds are transferred from the Contingent Fund in the Board of Public Works (BPW).
    • The total amount of general fund appropriations in the budget may not be increased.
    • Special, federal, and higher education fund appropriations may be increased if revenues are available to support the increase. Amendments over $100,000 are subject to legislative review.
    • BPW, at the request of the Executive Branch, may create positions during the course of a fiscal year. Budget bill language typically limits this authority to a certain number of new State-funded positions. There is currently no limit on the number of non-State funded positions or conversions of contractual full-time equivalent positions to State regular positions.
    • The Governor may reduce an agency's appropriation during the fiscal year by up to 25% with the approval of the BPW, to address shortfalls in revenue. Notice must be provided at least three business days prior to the BPW action, which includes information identifying each reduction in both dollar and percentage of funding. The Governor may not reduce funding through the BPW for debt service, the Legislative or Judicial branches; K-12 education (including the Schools for the Deaf and Blind), and salaries in effect for constitutional officers.
  • Nonbudgeted agencies including the Maryland Transportation Authority or the Maryland Environmental Service do not receive appropriations in the budget bill. Nonbudgeted agencies are self-funded and depend on their own revenue for agency operations. The Governor submits information on the annual budgets of certain nonbudgeted agencies, and the Department of Legislative Services prepares an analysis of certain nonbudgeted agencies for informational purposes.
Budget Closeout

Closeout is the process of closing the books on a fiscal year (July 1 to June 30). In this process appropriations are booked as:

Expended (obligation incurred and payment made)

Encumbered (obligation incurred but payment not made).

Reverted (unexpended and unencumbered general funds) or canceled (unexpended and unencumbered special or federal funds).
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