Future funding for Montgomery County Public Schools could take a hit as Maryland fights to preserve a digital advertising tax already tied up in court while the district absorbs hundreds of position cuts.
State officials filed an appeal Tuesday, Sept. 15, in Anne Arundel Circuit Court, asking a judge to review Maryland Tax Court rulings from August that struck down the tax. Apple, Google and Peacock TV had challenged the 2021 law and won separate rulings finding it violated the federal Internet Tax Freedom Act, Maryland Matters reported.
Revenue from the tax goes to the Blueprint for Maryland's Future, the state's K-12 education overhaul. The tax could generate an estimated $250 million a year statewide. Maryland has collected more than half a billion dollars over five years, but that money remains unspent while the legal challenge continues.
Fiscal year 2028 will be the first year Blueprint costs exceed dedicated revenues, according to state budget officials. Maryland already faces a projected structural budget gap of roughly $3 billion that year. Losing the digital ad tax permanently would widen that hole.
MCPS is already stretched thin. The district's $3.7 billion fiscal year 2027 budget, the largest in its history, still came in $36 million below what leaders requested. To close that gap, the Board of Education cut 415 positions, including social workers, security assistants and special education staff the district had planned to add, WJLA reported.
"We cannot spend money we do not have … Nobody runs for the Board to make reductions," MCPS Board President Grace Rivera-Oven said June 5 when the board approved the budget.
Comptroller Brooke Lierman said in a statement Sept. 15 that she supports the attorney general's appeal and expects courts to uphold the law. She said the tax was enacted to make large tech companies contribute to public school funding.
The Maryland Tax Court also found the law violated the First Amendment, the Commerce Clause and the Due Process Clause of the U.S. Constitution, according to the Associated Press. The court ordered the state to repay taxes already collected.
Senate President Bill Ferguson and House Speaker Joseline Pena-Melnyk issued a joint statement after the Aug. 14 ruling saying they disagreed with the decision and expected the legal process to continue.
No hearing date has been set in the circuit court case. The court will review the tax court's administrative record for legal errors but will not hold new hearings.
