Maryland closed fiscal year 2025 with slower economic growth, mounting losses in the federal workforce, and increasing strain on state finances, according to the state’s Annual Comprehensive Financial Report for the year ended June 30.
The report provides a detailed accounting of revenues, spending, debt, and economic conditions as Maryland confronts budget stress tied to federal downsizing, inflation, and uneven job creation.
“Every year, the Annual Comprehensive Financial Report provides us with a moment of reflection,” Comptroller Brooke E. Lierman wrote in the report’s transmittal letter, pointing to the state’s efforts to battle changing economic conditions while modernizing government operations and maintaining long-term fiscal balance.
The report shows Maryland’s total net position declined by $1 billion during fiscal year 2025, largely driven by higher expenses and accounting changes related to compensated absences. Governmental activities posted $59.8 billion in expenses against $56.8 billion in revenues, while business-type activities recorded a net increase. Combined revenues reached $64.4 billion as total program costs rose to $65.2 billion.
Maryland’s labor market is also a significant concern. The state lost about 6,200 payroll jobs through September 2025, with federal employment accounting for the largest share of the decline. Roughly 14,600 federal jobs were eliminated from Maryland payrolls since January, roughly 9% of the state’s federal workforce. The report notes that the figures did not yet capture deferred resignations that took effect later in the year.
Despite the pressure, tax collection remained relatively stable, helped in part by continued federal spending and contractor activity. Still, real gross domestic product growth in Maryland slowed to 1.1% year over year in the second quarter of 2025, down sharply from late 2024. The unemployment rate rose to 3.8% by September, while wage growth slowed as job losses were concentrated in higher-paying federal positions.
The report also details growing strain on the state’s balance sheet. Governmental funds ended the year with a combined fund balance of $11.2 billion, a decline of $3.7 billion from the prior year. The general fund posted an unassigned deficit of $0.9 billion, reversing a surplus recorded the year before. Long-term obligations continued to rise, with total bonded debt and lease liabilities reaching $23.8 billion.
State officials pointed to modernization efforts as part of their response, citing new case-tracking systems, expanded public dashboards, and improvements to taxpayer services. Maryland again received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association, the 44th consecutive year the state has earned national recognition.
Looking ahead, the report frames fiscal year 2026 as a test of fiscal discipline. A projected $2.95 billion shortfall is being addressed through spending controls, tax policy adjustments, and efforts to preserve an 8% Rainy Day Fund reserve totaling $2.05 billion.
“Together, we will continue to build a Maryland that is fiscally sound, economically vibrant, and committed to providing opportunities for all,” Lierman wrote.
Despite the deficit, Maryland Gov. Wes Moore (D) said his proposed budget for fiscal year 2027 shows economic progress for the state.
“Through this budget proposal, our administration is choosing to protect our people, focus on driving down costs for working families, and strengthen our state’s economic competitiveness — all without raising taxes or fees,” he said in a Jan. 21 statement. Marylanders are counting on us to deliver results, and this budget marks the next chapter in building a safer, more affordable, and more competitive Maryland.”