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Baltimore City is planning to balance the budget this year by leaning on higher fees on niche services, echoing a strategy used by Maryland lawmakers amid federal uncertainty and a state budget crunch.

Baltimore's $4.7 billion fiscal 2026 budget plan, unveiled Tuesday in a preview for the media, grows the budget by $478 million to pay for 166 new hires, cover wage increases for teachers and police and fund a variety of capital projects. The city wants to use taxes and fees on taxi cabs, waste disposal and emergency medical services for non-Medicaid patients to make up for an $85 million budget gap, mimicking the state government's move to use taxes that target specific services to raise revenues.

City officials are relying on those fees to cover several large spending increases coming Baltimore's way. Among them are salary boosts for teachers, who are set to receive a 3% pay hike over the next two years through a collective bargaining agreement signed in December, and police officers, who also won a raise in a round of collective bargaining that same month. The state government is also leaning on local municipalities like Baltimore to contribute more to teacher pensions and cover more of the costs to maintain the State Department of Assessments and Taxation as it deals with its own budget crunch, according to city budget officials. The state is planning on adding fees on technology services and public land records to cover part of its budget shortfall.

City officials plan to use law enforcement as a revenue generator by installing six new speed and red-light cameras and cracking down on crimes like illegal dumping. The proposed budget also includes some measures to make government more efficient. To cut expenses, the city wants to eliminate some external contracts by bringing more administrative services in-house. It's also looking to reduce overtime paid out to law enforcement officers by shifting several police department positions to civilian roles. The city's large overtime payments have been harshly criticized, as some staff make more from overtime than their actual salaries.

The entire budget process is shrouded in the uncertainty of how federal and state government decisions will impact Baltimore. The Trump administration is planning a wide slate of cost-cutting measures that have already hit the city, leading organizations like Global Refuge and Johns Hopkins University to lay off hundreds of employees. If more federal cuts trickle down to the local level, the city's budget could look very different as it goes through the City Council approval process.

A loss of federal workers, for instance, could decimate Baltimore's tax revenue. Around 12,000 federal jobs are based in the city, with an average wage of $103,000, according to budget officials. That number does not include the thousands of people who commute from Baltimore to Washington, D.C., for work, according to traffic data. If people begin to leave the city because of federal job cuts, the government could see a decline in income taxes and property values, devastating its two most crucial revenue streams.

There could also be more direct impacts. The city expects to receive $202 million of federal operating grants, and budget officials say none of Baltimore's annual grants from the government, such as Head Start funding, have been affected by federal cuts so far — but that could change. Influential conservative think tank the Cato Institute believes one of the largest federal sources of money for Baltimore, community development block grants, could be ripe for cuts by Elon Musk’s Department of Government Efficiency.

Even in the face of that uncertainty, budget officials believe tax revenue will continue to grow on the back of rising incomes and residential property values. Budget officials project income tax revenue to grow by 7.1% and property tax revenue to grow by 4.9%. Those predictions come with an asterisk, as they do not reflect the impact federal layoffs may have on the city.

The expected property tax revenue boost comes despite a lag in Baltimore City’s commercial property assessments, which trail the rest of the region amid a decline in the downtown office market . Assessments grew by 11% in the city compared to neighboring counties and Frederick, which saw a 21.2% assessment growth. The boom in residential real estate value since the pandemic has partly made up for that sluggishness, with residential property assessments growing by 20%. Property assessments are done on a triennial basis, with a third of city properties assessed every year. The growth in assessments in the 2026 fiscal year reflects property values in downtown and North Baltimore.

The budget proposal will head to the Board of Estimates for consideration and then on to the City Council for hearings and possible adjustments by late June. The council has the ability to shift and add funds to the proposed budget.