Biennial Budget

Governor Mills’ budget sets up Maine for fiscal ruin

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The Maine Heritage Policy Center (MHPC) on Monday released a new analysis of Gov. Janet Mills’ biennial budget proposal during a press conference at the State House. The report, titled “The Proposed Mills Budget: Irresponsible. Unsustainable.” shows that overall spending levels in the governor’s budget cannot be sustained into the future.

In addition, many of the priorities outlined in the proposal work against one another, eliminating the possibility of meaningful property tax reductions as claimed by Gov. Mills and her allies.

Gov. Mills has acknowledged the possibility of a recession in the coming years, however the budget she proposed last month ignores this possibility entirely. The Mills budget would wipe out Maine’s surplus and spend nearly every penny of projected revenue over the biennium, leaving minimal cushion to protect taxpayers and state savings accounts. 

“Governor Mills and her team showed no fiscal restraint in crafting this budget,” MHPC CEO Matthew Gagnon said. “Almost every available cent has been earmarked to grow government.”

The $8.041 billion budget proposal would be the largest ever to fund state government and leaves taxpayers and the Budget Stabilization Fund exposed if Maine experiences an economic downturn, revenue projections fail to materialize or the cost of government exceeds estimates.

“The Mills Administration has decided to spend away our surplus and virtually all projected revenue. The Budget Stabilization Fund has already been raided and this proposal does not outline a long-term funding source for Medicaid expansion. Maine taxpayers will pay the price if we move forward with this budget as proposed,” Gagnon said. 

“We see this package as a collection of campaign promises without a vision, without sustainability and without a lot of prioritization,” Rep. Sawin Millett, a member of the legislature’s Appropriations and Financial Affairs committee, said on Monday.

The analysis highlights the cost overruns that are likely to come as a result of expanding Medicaid. Gov. Mills’ budget proposes spending $146.7 million on Medicaid expansion over the biennium. Evidence from other states suggests that Maine may need to dedicate an additional $134 million to the program in the future if the state experiences similar cost overruns.

More than 12,150 Mainers have enrolled in Medicaid expansion as of March 15. Maine is adding an average of more than 1,200 people to the program each week and is on pace to surpass the 70,000 enrollment projection before April 2020. Maine DHHS has not released information regarding how many new enrollees currently receive services under the traditional Medicaid reimbursement rate versus the expansion rate, which would help in estimating the long-term fiscal costs of the program.

Gov. Mills claimed upon the release of her budget that boosting state funding in K-12 education by $126 million and incrementally increasing municipal revenue sharing would result in property tax cuts, but the analysis released today makes clear that these decisions will not provide relief to property taxpayers.

While the state was slated to share 5 percent of revenues in FY 2020, the Mills budget would move Maine to 3 percent by the end of the biennium, resulting in an estimated $60 million in additional funds for municipal revenue sharing. By increasing revenue sharing to 3 percent instead of 5 percent, Mills economizes nearly $160 million to spend on other programs.

“A more effective means of providing tax relief to Maine families would be to return these funds to taxpayers in the form of direct income tax rate reductions,” MHPC policy analyst Adam Crepeau said. “There is no guarantee, and in fact it is unlikely, that increases in municipal revenue sharing will result in reductions in local property taxes.” 

Gov. Mills’ proposal increases spending within the Department of Education by $324 million and takes on two new costly initiatives in universal pre-K and a $40,000 minimum annual teacher salary mandate. The proposal dedicates $7 million to school administrative units in FY 2021 to establish a statewide public preschool program and $10 million in the same year for districts to implement the minimum teacher salary.

This $7 million in funding for a universal pre-K program is considered the first step in a four-year plan, but full implementation will require much larger appropriations. The Mills administration has also conveyed its intention to transfer the financial burden of the minimum teacher salary mandate on local districts. Maine families will not see property tax reductions as a result of increased state spending on education. 

“It’s clear the administration did not search for efficiencies or ask tough questions in the education portion of this budget,” Crepeau said. “Instead, this budget aimlessly throws money at the system and creates new programs that will burden local property taxpayers in the years to come.”

Sound fiscal management over the last eight years has measurably improved Maine’s financial standing. However, Gov. Mills’ proposal would grow state spending by 11 percent, far exceeding the inflation rate and personal income growth. Had Maine’s budget increased in line with inflation since 2005, the state would be spending only $7 billion over the next biennium, nearly $1 billion less than what Gov. Mills has proposed. 

“This pattern of spending is unsustainable,” Gagnon said. “This budget takes on more priorities than we can afford to fund in the years ahead.”

“That’s not justifiable, it’s certainly not sustainable and it sets up the 130th Legislature for a major crisis, particularly if the economy doesn’t grow as some of the rosier forecasts within the administration predict,” Millett said.

MHPC is hosting educational events in Portland and Bangor on Thursday, March 21 to share the findings of the analysis. More information about these events can be found here.

The full analysis of the governor’s proposed budget can be found here.

About Jacob Posik

Jacob Posik, of Turner, is the director of communications at The Maine Heritage Policy Center (MHPC) and the editor of The Maine Wire. He formerly served as a policy analyst at MHPC. Posik can be reached at jposik@mainepolicy.org.

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