Commentary

Maine not out of the woods despite rosier revenue projections

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Though Maine’s response to the coronavirus pandemic has undoubtedly taken a toll on the state’s finances, the future budget outlook isn’t as bleak as it once was. Over the summer, Maine’s revenue forecasting committee anticipated a $1.4 billion shortfall over three budget years due to declining revenues from shuttering schools and businesses and ordering Mainers to stay at home. 

Over the Thanksgiving holiday, the committee released new data that show lawmakers and the governor should anticipate having a smaller budget gap to plug than was originally expected. The committee’s most recent estimate scales back the $1.4 billion figure to something closer to $600 million. 

In July, the committee anticipated Maine would experience a shortfall of more than $500 million through the remainder of the current fiscal year. That figure was effectively cut in half in its most recent estimates, according to the Bangor Daily News. Similarly, the committee previously forecasted an $883 million shortfall over the next two-year budget cycle ending in 2023, but that number has been revised down to less than $400 million.

While the new projections paint a rosier picture for the governor, the Appropriations Committee and the rest of the Maine Legislature, we’re still talking about a multi-hundred-million-dollar shortfall. Tough choices still lie ahead for the governor and Maine lawmakers, and how we get to a balanced budget remains a serious point of contention.

In 2019, Governor Mills notably promised not to raise taxes on hardworking Mainers in her first budget proposal. Though she and lawmakers ultimately could not resist the urge to raise taxes on some people, they did not make major changes to the structure of Maine’s individual income tax, as some feared they would. Despite all the hardship Mainers have endured in 2020, the governor has not extended a similar promise in crafting her upcoming budget proposal. 

There are few options available to keep Maine’s budget balanced moving forward. We’ll need to raise new revenue or cut spending, or perhaps a combination of the two. But most lawmakers have been hesitant thus far in calling for new tax increases during the pandemic. 

Sen. Cathy Breen suggested to the Bangor Daily News that Maine dip into its Budget Stabilization Fund, or rainy day fund, valued at more than $250 million. This isn’t enough to fill the entire deficit, but lawmakers could use some of it tandem with spending cuts or tax and fee increases. Doing so could leave Maine unprepared for the next economic downturn after the pandemic, however, and taking money out of the fund is generally less appealing to the public than is putting money into it. 

We’ll learn more about the governor’s strategy when she releases her budget proposal next month. I have a feeling she does not plan to raise taxes on Mainers at a time they can least afford it, but stranger things have happened. I do know she could earn a ton of good will by extending to Mainers the same promise she did in 2019, and following through on it. 

The best path forward remains right-sizing government by cutting unnecessary spending. A great place to start is the $800 million in additional spending approved by the governor and lawmakers in our current budget, since it was ultimately proven that we can’t afford it.  

About Jacob Posik

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

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