Moore to use surplus to help plug Medicaid, child care budget gaps

Budget officials are expected to use the state’s surplus revenue from last fiscal year to help cover Medicaid and child care spending gaps, among other expected budget shortfalls, according to the governor’s office.

The state emerged from fiscal year 2024, which ended in June, with about $479 million in uncommitted surplus after receiving a record amount of interest income and benefiting from stronger-than-expected revenue growth.

Officials generally plan for the state to have surplus revenue. In its $63 billion budget for Fiscal Year 2025, which runs through June of next year, Gov. Wes Moore and his team planned for a surplus of about $118 million.

With $361 million more than expected, the Moore administration is hoping to cover Medicaid and child care costs that are rising faster than expected.

“This positive year-end result positions us better to navigate the anticipated challenges this year,” Moore spokeswoman Brittany Marshall said in a statement Friday.

With approval from the Board of Public Works, which the governor chairs, the Moore administration has already cut about $149 million from this year’s budget to help pay for Medicaid expenses and the Child Care Scholarship Program, through which the state helps families pay child care costs.

The cut includes less money for security upgrades at colleges and universities, for local health departments, for salary increases in the Office of the Public Defender, for scheduled hirings in several agencies and departments, and for multiple government grant programs.

When the legislature reconvenes in January, lawmakers can then vote to use the money to cover the shortfalls.

It hasn’t been clear exactly how much the state will need for Medicaid and the child care program, a senior administration official previously said.

After enrollment in the state’s Child Care Scholarship Program jumped from about 24,000 in early 2023 to roughly 33,000 by the end of the year, the administration expected the number of children enrolled to reach upwards of about 40,000 during the current budget year, which began July 1.

Enrollment was already nearing 41,000 in June and it has continued to rise, according to the Moore administration.

Moore and his team have maintained that the program — and expanding access to child care broadly to assist families and empower more women to join and remain in the workforce — is a priority.

State officials also underestimated the number of Medicaid enrollees who would remain in the program despite the end of relaxed pandemic-era policies.

During the COVID-19 public health emergency, those enrolled in Medicaid continued to receive coverage even if they were no longer eligible. But with the emergency over, those eligible have been required to renew by their next redetermination date or risk losing coverage.

Reimbursements from the federal government to states have also wound down, prompting states to resume the cost-sharing model in place before the pandemic.

Tracking exact costs of the Medicaid “unwinding” has proven difficult for state officials, and the Moore administration underestimated the number of Marylanders who would renew their Medicaid coverage.

Shortfalls to pay for Medicaid and child care are just a part of the fiscal headwinds facing the governor and his team. Maryland has for years faced projections of budget deficits reaching several billion dollars, largely driven by a lofty and expensive education plan.

Infusions of federal COVID-19 aid led to years with surpluses and delayed the need for spending cuts or tax increases. Moore and top Democrats in the legislature have avoided broad tax increases, but the conversation is sure to be among the dominant discussion points when lawmakers reconvene in January for the 2025 session.

In the coming weeks, officials will be waiting to see how the latest revenue report will affect future forecasts when the state Board of Revenue Estimates meets on Sept. 26 to outline the state’s near-term budget outlook.

“Significant challenges remain for the FY2026 budget,” Marshall said. “These challenges are years in the making, and they can’t be solved overnight.”