Citizen's Guide to the Budget:  Budget Process

  • Article III, Section 52 of the Constitution of Maryland establishes the respective powers of the Governor and the General Assembly in adopting the operating budget and provides a schedule for its submission and approval. Further law pertaining to the operating budget is set forth beginning in Section 7-101 of the State Finance and Procurement Article.

  • Under the Constitution of Maryland, the Governor must submit a budget to the General Assembly on the third Wednesday in January in each year (or by the tenth day of session in the first year of a term for a newly elected Governor). The budget consists of a detailed statement of revenues and intended spending, along with a bill making the proposed appropriations. The Governor must accept the proposed budgets for the Judicial and Legislative branches without revision. The budget must be balanced when submitted. In other words, the proposed appropriations must be supported by estimated revenues.
  • After submission of the budget bill, the Governor may change proposed appropriations by submitting one or more supplemental budgets. Supplemental budgets also permit the Governor to correct errors and omissions in the original budget. Although customarily accepted, supplemental budgets may only be attached to the budget by consent of the legislature.

  • Under the Constitution of Maryland, the budget bill is introduced in both chambers. By custom, the House and Senate move the bill in alternate years – the House in odd numbered years, and the Senate in even numbered years.
  • The legislature may reduce or delete appropriations proposed in the budget bill. Appropriations for statutorily mandated support for public schools may not be reduced without accompanying legislation amending the statutory mandate, and the salaries of constitutional officers may not be reduced. The legislature may also add language to the budget bill making appropriations contingent or conditional, or restricting how funds may be spent. Such language has the force of law for one year, while that budget is in effect. Budget bill language may not change or conflict with existing State law.
  • Beginning with the 2023 session, for fiscal 2024, the legislature may amend the budget to increase appropriations made by the Governor as well as add items to appropriations for Executive Branch agencies. However, the total appropriation for the Executive Branch may not exceed the total proposed appropriation submitted by the Governor. The legislature may also add or increase funding for the General Assembly and the Judiciary, a power which existed prior to the 2023 session.
  • The legislature must complete action on the budget by the 83rd day of session. If the budget is not passed by the 83rd day, the Governor must issue a proclamation extending the session if a budget is not passed by the 90th day. At the end of the 90th day, if the budget is not passed, all other legislation fails and only the budget can be considered during an extended session.
  • The budget bill must be presented to the Governor, who may veto items relating to the Executive Department that have been increased or added by the General Assembly but may not veto any other items in the budget bill. If an item is vetoed by the Governor, the General Assembly may convene a special session within 30 days of the veto to consider an override. If the Governor vetoes an item that was increased or added by the General Assembly and the legislature does not override the veto, the item will revert to the proposed appropriation submitted by the Governor or be removed from the budget (in the case of new funding items) and shall be law without further action. Any item not vetoed by the Governor becomes law without further action.
  • In addition to budget action, the legislature may also affect the level of State expenditures through other legislation. The first type of legislation is a supplementary appropriation bill, which raises a tax and directs its revenue to specified purposes. Supplementary appropriations are subject to veto and may only be passed in final form after the budget bill has passed in its final form. The capital budget bill is considered a supplementary appropriation bill.
  • The second type of legislation that affects the level of State expenditures is any bill that mandates spending in future budgets, by setting a dollar amount for a specified purpose or establishing a formula that can be easily calculated. For example, many education aid programs for local jurisdictions are based on statutory formulas that provide an amount per student. Most of these formulas provide aid inversely to local wealth. Legislation to establish mandated appropriations are also subject to veto by the Governor.

  • Although the State has a 12-month fiscal year beginning on July 1 and ending on June 30, one entire cycle of a budget from initial formulation by the Governor to closeout takes about 29 months to complete. The formulation of a new budget commences during the summer of the previous year. In the months preceding introduction, each agency receives instructions on how to request funds and how much to request, has its request reviewed by the Department of Budget and Management, and receives an allowance in the proposed budget bill reflecting the decisions by the Governor.
  • Through its spending affordability process, the legislature offers input into the fiscal policy used by the Governor in preparing the allowance. Under this process, a statutory committee meets each fall to consider the condition of the economy and the State’s fiscal health and to recommend to the Governor the amount by which State government spending should be allowed to grow in the upcoming budget. The Spending Affordability Committee is also required to recommend end of year balances for the General Fund, Revenue Stabilization Account (Rainy Day Fund), and Transportation Trust Fund. Additionally, the committee must recommend a structural balance goal and a minimum expenditure level for system preservation by the Maryland Department of Transportation. By law, the Governor is not bound by the committee’s recommendations. However, if the proposed budget exceeds the spending affordability recommendations, the Governor must explain why in the budget message.
  • The General Assembly reviews the budget bill containing the Governor’s allowance during the 90-day legislative session. The bill (and any supplemental budgets) is referred to the budget committees of the respective chambers:  the House Appropriations Committee and the Senate Budget and Taxation Committee. The committees separately but concurrently hold about six weeks of hearings on the budget. Hearings are focused on one or more agencies (or units within an agency) per day. At the hearings, the committees receive an analysis of the agency’s budget, performance, fiscal and policy issues, and recommendations from the staff of the legislature’s Department of Legislative Services, Office of Policy Analysis. After the legislature’s analysts present their analysis and recommendations, the agencies are given the opportunity to brief the committees and respond to any issues raised or recommendations in the analysis. Testimony from the public is sometimes received as well. At the conclusion of the hearings in the chamber moving the bill, the committees take action on the budget, and the budget bill is reported to the floor and follows the course of other legislation. When the budget bill is enacted, the allowances contained therein become the legislative appropriation for the next fiscal year beginning on July 1 (or in the case of deficiency appropriations, are available immediately upon enactment of the bill).
  • After the operating budget is enacted, agencies can transfer appropriations internally or can increase special, federal, or reimbursable fund appropriations by budget amendment. Proposed amendments in excess of $100,000 require review and comment by the budget committees. At the end of the fiscal year, agencies close out the budget by accounting for the disposition of its appropriations. Appropriations may be spent, encumbered pending the delivery of goods or services, or unspent. Unspent appropriations either revert to the General Fund or, in the case of special or federal fund appropriations, are canceled and returned to the fund of origin for future appropriation.