State government spending has rapidly outpaced population growth in Maine over the last decade, according to a new report published Wednesday by Maine Policy Institute titled “Long-term Growth vs. Short-term Gimmicks: Maine’s Economy and Governor Mills’ Second Biennial Budget.” The analysis examines the effects of the coronavirus pandemic on Maine’s economy and the corresponding impact on the state’s finances and next biennial budget. It includes a number of policy reforms lawmakers could enact to achieve substantial savings for Maine taxpayers.
State lawmakers passed a supplemental budget last week to get Maine through the remainder of the current fiscal year and is set to tackle the biennial budget covering fiscal years 2022 and 2023 in the coming weeks.
The report finds that inflation-adjusted General Fund spending per Maine resident is $3,108, the highest on record. Since 2010, real spending on Maine’s General Fund has grown more than 20% while the state’s population grew only 1.66%. Had lawmakers kept spending on pace with population since 2010, per capita spending would be $2,626 and taxpayers would be saving 18% ($550 million) in the current fiscal year alone.
Two of Maine’s largest government departments, the Departments of Education and Health and Human Services, have been among the leading cost drivers. Maine’s decision to expand Medicaid to childless, able-bodied adults has caused MaineCare costs to balloon over the last two years, and per-pupil spending in Maine schools has also exploded despite a substantial decline in enrollment.
According to the report, there are 34,500 fewer public school students in Maine today than in 2001, a roughly 17% decline. However, inflation-adjusted per pupil spending is 70% higher.
While Maine is set to receive a large infusion of cash from the most recent federal stimulus package, the report says these funds do not change the underlying economic reality in Maine. The state’s businesses are still reeling from the shutdowns and economic restrictions, its population is aging and its tax code is uncompetitive with the rest of the country, particularly New Hampshire.
The analysis states the current level and pattern of spending is unsustainable, particularly in the shadow of the pandemic when thousands of Mainers are still out of work, school and struggling to make ends meet. The tourism and hospitality sector, which makes up nearly 10% of Maine’s economy, lost almost 20,000 jobs and 17.5% of personal income by November 2020. By the end of 2020, the state had lost 50,000 jobs and 20,000 workers had left the labor force.
To combat unsustainable levels of government spending, the report suggests the state implement a number of policy reforms that would save taxpayer dollars and allow the private sector to lead the charge out of the current economic malaise.
By aligning spending in the Temporary Assistance for Needy Families program to national averages, the report estimates the state could save between $40-60 million over the next biennium. The state currently spends more on public assistance than 44 states, more than any state in New England and nearly double the national average.
Reforming the state’s Medicaid system would also result in substantial savings. Childless, able-bodied adults aged 19-49 currently comprise more than 70% of the state’s Medicaid expansion population. By limiting expansion to those 50 and older, the state could reduce dependency among working age adults and save roughly $70 million.
It also suggests state lawmakers should implement reforms that send more K-12 education dollars directly to the classroom and away from costly school administration, as well as funding students instead of systems through the enactment of Education Savings Accounts.
A full list of suggested reforms and corresponding budget savings can be found in the graphic below.
“After everything Mainers have endured over the last year, we deserve a state budget that doesn’t spend beyond its means and leaves room for the private sector to drive growth,” said Nick Murray, policy analyst and lead author of the report. “Government cannot be the cart that pulls the horse. This publication provides a path for lawmakers and Governor Mills to budget for sustainable, long-term growth, instead of runaway taxes and spending.”
The full analysis can be read here.
