Governor Mills has proposed an $8.04 billion dollar General Fund budget. That is an 11 percent increase over the current $7.2 billion dollar budget.
Governor Mills promised that this tremendous budget increase will be “sustainable” and that the massive expansion of Medicaid for able-bodied, child-less adults would be paid for without new taxes. I wish that this were possible, but the evidence says otherwise. I can think of six reasons why this budget is unsustainable.
First, the Governor’s budget spends 99.995% of all available funds. That leaves a cushion of just one nickel for every $1000 spent. This leaves basically no margin for error, but emergencies happen. For example, fields have recently been found to be contaminated by carcinogenic perfluoroalkyl substances, and we don’t yet know the extent of the problem, how much clean-up will cost, or the impact it will have on Maine’s agricultural economy. This is an issue we couldn’t have imagined a few years ago. Natural and man-made disasters are things we won’t be able to afford with such a tight budget.
Second, in fiscal year 2021 the budget will be in the red by over $62 million dollars because all of the surplus accumulated under Governor LePage’s last budget will be spent in fiscal year 2020. The proposed budget spends this one-time surplus to pay for expenses that will be ongoing, such as new state employees. That doesn’t make sense.
Third, this budget relies on an optimistic economic forecast that is starting to fall short. So far this year, actual revenue is less than projected by over $20 million dollars. Economies operate in a cycle, and we are currently in the growth phase. That means that a recession should be expected in the near future, and we need to be prepared for this. Maine’s top economists reported that if we have just a mild recession, we will be forced to use our rainy day fund and it will be empty in 2021.
This leads me to the fourth reason that the proposed budget is unsustainable. We should be adding to the rainy day fund right now, while we still can. Maine owes the Federal government $72 million associated with the Riverview Psychiatric Facility. At any time, they can demand payment on that debt, which would drastically reduce our balance in the rainy day fund.
Fifth, typically legislators pass bills that add on more expenses to the governor’s budget. In fact, they have already proposed almost $2 billion in bonds. Where will this money come from?
And the sixth and most important reason this budget is unsustainable is the uncertainty surrounding Medicaid expansion. We simply don’t know how many people will sign up or what their medical needs will be. Different experts have given us different expense numbers. Other states that have expanded Medicaid, such as Virginia, Ohio, and California, greatly underestimated the expense.
Also, the federal share of Medicaid varies from year to year, depending on national economic factors that we can’t control. In fact, the federal share for existing Maine Medicaid recipients just went down by $14.1 million. I’m glad that the governor set aside an additional $29 million to help cover a shortfall, but based on the experiences of other states, we believe that this will not be enough money to be sustainable.
It’s often said that those who fail to learn from history are doomed to repeat it. When Maine previously expanded Medicaid, the cost was far underestimated, which led to yearly budget shortfalls, increased taxes and unpaid debt. State employees had to endure unpaid layoffs, budget curtailments, and wage stagnation.
Governor Mills promised a sustainable source of funding for Medicaid, but this budget does not provide one. Once the one-time monies are spent, and if enrollment turns out to be higher than anticipated, Maine will run out of money once again. This will mean a return to the annual budget shortfalls that were eliminated under conservative management, setting up Maine for future tax increases.
