Today, Governor Paul LePage announced he will introduce common-sense legislation that will help grow Maine’s rainy day fund and promote financial stability.
This announcement by LePage came about because, according to the Maine Revenue Forecasting Committee, Maine is forecasted to collect $72.7 million in excess General Fund revenue from now until June 2017.
LePage is therefore proposing to transfer this extra money to the Budget Stabilization Fund, commonly called the “rainy day fund.” The rainy day fund is used to cover budget shortfalls and to respond to financial crises, and is a key component of a fiscally responsible state government.
So what does this mean?
First, the income tax cuts enacted by LePage are clearly working. Maine’s economy is continuing to grow, and cutting the income tax rate has not had any negative effect on Maine’s ability to fund its state government, as it is collecting more money than anticipated.
Second, this practical move by LePage would ensure Maine has a real chance at long-term financial stability.
The current balance of Maine’s rainy day fund is just $111 million, which is enough to fund Maine’s state government for only 8 days.
This $111 million represents a mere 3% of all the money that is collected through Maine’s general fund every year. However, the Federal Reserve of Boston recommends that states have a reserve fund that is between 10 percent and 15 percent of their annual spending.
A recent report even highlighted Maine’s poor financial footing, and noted that Maine is ranked just 42nd in the nation for fiscal health.
But the LePage bill would be a big step towards a stable and responsible state government. It would ensure that this extra $72.7 million is saved in a responsible manner and not put to waste, or spent on additional and unnecessary projects.
“The Maine Legislature has shown that they cannot be trusted to exercise fiscal restraint,” said Governor LePage when announcing this legislation.
“In June, they passed a budget that increased spending by more than $300 million, and now, as part of our administration’s tax conformity proposal, a radical group of socialist Democrats has recklessly proposed raiding the fund of more than $20 million.”
If LePage’s bill passes, the balance of the rainy day fund would increase from $111 million to $178 million at the end of the current fiscal year, and to $183 million by the end of 2017.
Maine lawmakers would clearly be wise to support this fiscally responsible measure and prioritize Maine’s long-term financial health. They should prepare for the future and continue to grow Maine’s rainy day fund, and get behind LePage’s efforts.