DLS fiscal briefing: governor’s proposed budget would shrink disparity and local health grants on Eastern Shore

The Eastern Shore delegation heard a detailed fiscal briefing on Feb. 6 from the Department of Legislative Services that mapped how the governor’s proposed FY27 budget could alter state aid to local governments.

Hiram Burch, who led the DLS presentation, said the nine Eastern Shore counties are projected to receive about $935 million in state aid in FY27, of which roughly $850 million is direct aid to local units of government and school systems. "The numbers reflected in this report are based on the governor's proposed budget," Burch said, adding that the General Assembly could still change allocations before final adoption.

Burch emphasized three factors driving reductions for the four disparity-grant counties (Caroline, Dorchester, Somerset and Wicomico): the governor’s proposal to hold disparity grant funding at the FY26 formula level (about a $2.8 million reduction), last year’s one-time $5.8 million enhancement not being repeated, and the phaseout of teacher-retirement supplemental grants (about $1.5 million). He said those moves would amount to substantial cuts for low-wealth counties on the Shore.

Local health grants also drew sharp attention. DLS projected the Eastern Shore would receive roughly $24 million of the statewide $115.2 million local health grant pool in FY27, but Burch warned that changes adopted in 2025 to constrain the program to a core formula may reduce allocations for rural counties by 10–15 percent. "Local health departments on the Eastern Shore ... will receive a significant reduction in their funding in FY27," he said, while noting Department of Budget and Management officials have told DLS there may be money in the budget to cover state employee COLAs that has not yet been allocated to local departments.

Transportation and public safety programs were also covered. Burch said highway-user revenue shares that rose to 26 percent for local governments in FY26–27 are scheduled by current law to revert to 15.6 percent in FY28, which could reduce state-to-local transportation funding statewide by about $100 million and cost the Eastern Shore roughly $6.3 million unless the law is changed. Police-aid funding (around $77 million statewide) includes a component that pays roughly $1,950 per municipal sworn officer, which benefits municipalities with higher sworn counts.

Education funding remains the largest share of state aid: DLS estimates that nine Eastern Shore school systems will receive over $700 million in direct education aid, a $24 million increase from the prior year. The governor’s plan includes $228 million in enhancements tied to a revised free-and-reduced-meal enrollment count that extends a hold-harmless provision for one year and preserves roughly 34,000 students in the compensatory count, according to DLS.

During Q&A, members pressed DLS for additional county-level detail and a clear accounting of where county governments will absorb new costs. Burch and the DLS team said county-tailored briefing documents and speaking points on disparity grant impacts and retirement-distribution changes will be posted and emailed to the delegation by Monday.

What happens next: DLS asked members to monitor the BRFAA and the budget process in Annapolis and to raise concerns with DBM and the budget committees if they want adjustments. DLS will provide the requested county briefings and answer follow-up questions about unallocated, discretionary grants and teacher-retirement cost shares.