Governor Mills unveils $850 million supplemental budget that would lift state spending to record levels

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On February 15, Gov. Janet Mills released her supplemental budget proposal, which includes $850 million in proposed spending and provides more detail on several policies she announced during her February 10 State of the State address.

In a press release, the Mills administration characterized the governor’s proposal as a “cautious, fiscally-responsible approach, dedicating more than half of the surplus to one-time initiatives rather than ongoing spending.” 

Mills’ proposed budget would spend all but approximately $12 million of the revenue projected through fiscal year 2023.

“The budget also leaves nearly $12 million in unappropriated funding for the discretion of lawmakers,” the Mills administration wrote in a press release.

Mills’ proposal spends half of the projected $822 million General Fund surplus on relief checks for taxpayers. Mills first endorsed the idea during her State of the State address, saying approximately 800,000 Mainers would receive roughly $500 checks. 

The budget proposes creating a nonlapsing COVID Pandemic Relief Payment Program Fund, funded by a transfer from the General Fund’s unappropriated surplus. The fund would be located within the Department of Administrative and Financial Services (DAFS). Mills’ supplemental budget proposal transfers $411 million from the General Fund to DAFS’ COVID Pandemic Relief Payment Program Fund. 

The money will be disbursed to Mainers who, by October 31, 2022, file an income tax return as a full-year resident. Couples filing joint returns of under $150,000, individuals filing as heads of household who make under $112,500 and single individuals or married individuals filing separately who make under $75,000, will all be eligible to receive a $500 relief check under the plan.

Checks will be distributed between July 1 and December 31 and will be excluded from taxable income for the state. 

The program, according to the supplemental budget, will “help Maine people respond to the economic fallout of the COVID-19 pandemic and enable Maine people to combat rising costs due to pandemic-induced inflation and supply-chain impacts.”

Beginning January 1, 2022, the budget also increases the state’s earned income tax credit from 25% to 50% for individuals with no qualifying children and from 12% to 25% for other eligible individuals.

It also increases the state’s property tax fairness credit, raising the maximum amount an individual resident under the age of 65 can claim from $750 to $1,000 and raising the maximum amount an individual over the age of 65 can claim from $1,200 to $1,500. For individuals filing jointly where at least one spouse is over the age of 65, the credit will also increase from $1,200 to $1,500.

As promised in her State of the State address, Mills’ budget proposal includes several provisions for student loan debt. 

The budget creates a student loan repayment tax credit, a program Mills floated in her State of the State address when she announced her intention to overhaul the Opportunity Maine tax credit by simplifying the program’s eligibility requirements, in line with recommendations from Sen. Matthew Pouliot (R-Kennebec).

The student loan repayment program repeals the educational opportunity tax credit and replaces it with a student loan repayment tax credit. Beginning in 2022, the new credit would allow a qualified individual, meaning anyone who earned a degree from an accredited community college or university after December 31, 2007 and who earned an income totaling at least 936 hours at minimum wage, to claim loan payments up to $2,000. Loan payments from previous tax years can be carried over. The credit caps at $25,000 over an individual’s lifetime.

Mills also announced an initiative to have the state fully fund two years of community college education for some Mainers during her State of the State address. Mills promised two years of no-cost community college education to high school students who graduate between 2020 and 2023 and enroll in a Maine community college program in either the fall of 2022 or 2023. 

Her supplemental budget allocates $20 million from the General Fund surplus for this purpose. It would transfer that money to a fund controlled by the Maine Community College System and requires the system to report on the success of the program to the governor and the legislature.

Outside of the State of the State address, the Mills administration said it would earmark $8 million for the state’s child welfare system. Her proposal makes several changes to the state’s child welfare services program. It stipulates that the director of the ombudsman program must serve full-time and have more experience than previously required. It also puts staffing under the discretion of the nonprofit contracted to run the ombudsman program and requires the contract to include funds for the nonprofit to pay the health insurance costs of employees. 

The changes included in the supplemental budget would also set the term of the contract for nonprofits running the ombudsman program to five years, but stipulates it can be terminated before then. It also requires the nonprofit running the program to provide information about the services provided by the ombudsman through a publicly accessible website. The ombudsman would also be able to provide opinions and recommendations about the state’s proposed programs and rules, as well as input on child welfare to the state Department of Health and Human Services (DHHS) and to legislative committees.

The changes further require DHHS to notify the ombudsman program of statewide policy changes that affect the child welfare system and of any child fatalities that occur in the state.

The supplemental budget would also create the Housing Opportunity Program within the Department of Economic and Community Development (DECD). The program’s purpose would be to “encourage and support the development of additional housing units in Maine, including housing units that are affordable for low and moderate income people and housing units targeted to community workforce housing needs.”

The Housing Opportunity Fund would also be established as part of the program. The DECD would solicit applications for grants, paid for by the Housing Opportunity Fund, through a competitive application process. Grants would be awarded “to experienced service providers to support municipal ordinance development, technical assistance and public process and community engagement support. Programs may encourage regional coordination between municipalities.”

The governor’s supplemental budget also includes a number of appropriations. It would transfer $10 million from the unappropriated General Fund surplus to the Maine Budget Stabilization Fund, or rainy day fund.

It also appropriates $6.5 million from the General Fund surplus for the Maine Military Reserve Fund to settle “outstanding obligations of the Maine Military Authority.”

It further transfers up to $8.5 million from the Reserve for General Fund Operating Capital to a COVID-19 response fund created by the state controller. The funds would be used to address “funding needs related to the novel coronavirus disease” and could be expended based on allotments established by financial order and approved by the State Budget Officer and the governor. 

The supplemental budget would appropriate $1.5 million from unappropriated General Fund surplus for the Department of Agriculture, Conservation and Forestry (DACF) so the agency could distribute “grants for durable (glass, polycarbonate, etc.) greenhouse structures and associated siting and installation costs to schools, community centers, and other eligible public entities.” This was another initiative Mills unveiled during her State of the State address.

The budget further creates an Education Stabilization Fund and appropriates $30 million from the General Fund surplus. The money in the stabilization fund would be used to “provide resources to maintain budgeted levels of funding for Essential Programs and Services should there otherwise be insufficient General Funds, federal matching funds or any other shortage of funds.”

Mills’ budget request also includes several appropriations designed to address the presence of perfluoroalkyl and polyfluoroalkyl substances (PFAS) in the state. The budget includes a $3 million appropriation from the General Fund surplus for the DACF to use to fund abatement and cleanup of the threats PFAS pose to agriculture.

The budget appropriates another $3.2 million from the General Fund surplus and allots it to the Department of Environmental Protection to assist “Maine laboratories with equipment purchases that will increase capacity for sample testing and analysis” of PFAS. The DEP would be required to create a segregated subsidiary account within the agency’s Uncontrolled Sites Fund for the money.

Other appropriations in the bill include $750,000 from the General Fund’s surplus to be sent to the Office of the Attorney General’s Victim Compensation fund to be used for “financial reimbursements for losses suffered by victims of violent crime and their families and reimburses hospitals for sexual assault examinations.”

It would appropriate $970,100 from the General Fund surplus to cover operating expenses at Loring Development Authority. 

Another $7 million from the unappropriated surplus would go to the Efficiency Maine Trust to fund electric vehicle rebate programs, including incentive programs.

Mills’ proposal would also transfer $30 million from the unappropriated General Fund surplus for the MaineCare Stabilization Fund.

Another $655,200 would be appropriated to Maine Civil Legal Services to support “increased costs for civil legal services for persons unable to afford a lawyer.” The budget stipulates this is a “one-time transfer to support increased costs resulting from the pandemic.”

The plan stipulates $300,000 would be transferred from the unappropriated surplus to the legislature’s study commission fund to “support the costs of contracting with an outside entity to conduct and complete an actuarial study as required for the Commission to Develop a Paid Family and Medical Leave Benefits Program.”

The supplemental budget would also create the Imagination Library of Maine Program, to be administered by the state librarian. The program would “promote and encourage reading by children of the state of Maine and to develop a statewide initiative for encouraging children to develop a love of reading by providing age-appropriate books to children at their homes from birth to age 5 on a monthly basis.”

The budget appropriates $200,000 from the General Fund surplus and gives it to the Imagination Library of Maine Fund to provide 50% dollar matching funds, if available, to support local partners providing one book per month to children eligible for the program.

Other appropriations from the General Fund surplus include $14.7 million that would be transferred to the Maine Public Employees Retirement System. The money would create a retirement benefits reserve account within the General Fund “for the purpose of providing the resources to fund a one-time retirement payment for retired state employees and teachers.”

The budget would also transfer $100 million from the General Fund surplus to the Department of Transportation, with $85 million going toward highway and bridge projects and the remaining $15 million to support highway, bridge and multimodal transportation projects.

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