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SB 127

State Government - Grants and Contracts - Reimbursement of Indirect Costs

2025 Regular Session Introduced by Cheryl Kagan

Maryland permits state agencies to reimburse external grant recipients for indirect administrative costs, shifting overhead expenses from states to grantees.

Approved by the Governor - Chapter 163
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Bill Summary · SB 127

Legislative bill overview

SB 127 modifies Maryland's grant and contract reimbursement policies to allow state agencies to recover indirect costs—such as administrative overhead, facilities, and support services—when awarding grants or contracts to external organizations. The bill establishes parameters for how these indirect costs are calculated and reimbursed, affecting state funding relationships with nonprofits, educational institutions, and contractors.

Why is this important

State agencies currently absorb many administrative costs when funding external organizations, effectively subsidizing grantees and reducing available direct program funding. This bill shifts cost responsibility, potentially freeing state resources for direct services or reducing overall grant amounts needed. However, it may increase costs for recipient organizations—particularly smaller nonprofits with limited financial capacity—and could affect program accessibility if organizations pass costs to beneficiaries.

Potential points of contention

  • Burden on nonprofits and small organizations: Smaller grantees may lack sophisticated accounting systems to calculate or absorb indirect costs, potentially discouraging applications or reducing service delivery capacity
  • Reduced funding effectiveness: If indirect cost reimbursement comes from existing grant budgets rather than additional appropriations, organizations receive less money for actual program services
  • Implementation complexity: Agencies must establish consistent indirect cost calculation methodologies, which could create administrative burden and inconsistency across state government

Compiled from official sources — confirm details with the bill’s official record.

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