Fiscal

Mills attempts to rewrite history on rainy day fund increase

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Don’t let Gov. Janet Mills play you for a fool.

In a recent press release, Mills took credit for Maine’s Budget Stabilization Fund, also known as the “Rainy Day” fund, reaching a historic high of roughly $492 million. The problem is the fund owes nothing to her fiscal management of the state.

The subheading of the governor’s press release reads, “With deposits exceeding $280 million, [the] State’s savings account has more than doubled under Mills Administration.” While technically correct, it’s certainly inaccurate to suggest her “sound fiscal management” had anything to do with it.

Don’t be fooled; this is simply semantic wordplay, not a reflection of the governor’s supposed financial handiwork. The increase in the rainy day account was enabled by an avalanche of federal cash, not sound financial decisions made by Mills and the Legislature. She is simply trying to shift the narrative in her favor.

Mills’ condescending, revisionist history shines through especially clear in one line from the press release which reads, “These surplus revenues… [are] tribute to… the responsible fiscal moves Governor Mills and the Legislature made throughout 2020 and 2021.”

Responsible fiscal moves? Are we just going to ignore the borderline financial ruin that came in 2020?

When Mills introduced her first budget upon assuming office, it was heavily criticized, and rightfully so, for spending nearly all projected revenues. It did not leave room to survive a low-to-moderate stress test if the economy contracted over the budget cycle. As we all know, in came a rather severe stress test in the form of the pandemic in early 2020. Early predictions stated Maine could lose as much as $1 billion in revenue due to the pandemic. The governor surely didn’t help in this regard with her severe shutdowns and restrictions mandated by executive order.

Forecasters’ warnings were correct: Mills was playing a dangerous game in leaving little room in the state budget for a potential economic downturn, which explains why she and her administration released numerous statements over the course of the pandemic imploring Congress to allow federal assistance funds to be used for revenue backfill. All of this came to a head last September. To ensure the state met its financial obligations through the fiscal year, Mills signed a curtailment order that month. After the order was issued, more federal money began pouring in to keep people on payrolls and inject spending back into the economy, as well as support schools, the unemployment system and more.

The federal government’s never-ending coronavirus spending is what kept revenue pouring into the state’s coffers during this time, and best explains why the governor was able to make further investments in the rainy day fund.

Anyone who hasn’t been living under a rock for the last year knows this action wasn’t the result of the governor’s sound financial planning, but rather a massive injection of cash from Washington.

Per the Senate Republican office, “The money sent directly to the state government in the CARES Act and the American Rescue Plan alone exceeded $2 billion.”

If left to the governor and Legislature alone without federal assistance, there’s little doubt the fund would not stand at the levels it does today. Mills’ comments this week amount to little more than political posturing, and she and her administration know it.

About Nick Linder

Nicholas Linder, of Cincinnati, is a communications Intern for Maine Policy Institute. He is going into his second year of studying finance and public policy analysis at The Ohio State University. On campus, he is involved with Students Consulting for Nonprofit Organizations and Business for Good.

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