The State of Maine is projected to face a massive shortfall of nearly $1 billion for fiscal years 2026 and 2027, the first two years after Gov. Janet Mills (D) will leave office, according to Maine’s budget officer.
The $949.2 million shortfall includes a $636.7 million projected deficit in the General Fund and a Highway Fund gap of $312.5 million for the 2026-2027 biennium, according to a recent four-year budget forecast report released by the Department of Administrative and Financial Services (DAFS).
According to DAFS, these projections are based on current laws and economic trends. Based on those conditions, DAFS’ analysts are projecting a massive budget deficit looming on the horizon.
“This report compares the most recent revenue forecasting against current appropriation and allocation funding requirements in law,” DAFS Commissioner Kirsten Figueroa said in a letter appended to the report.
“The final result – often called the structural gap – is the amount of money by which revenues would have to increase, expenses would have to decrease, existing laws would have to be amended, or some combination thereof would have to be achieved in order for revenues to meet expenditures, as identified by law,” Figueroa said.
The report was delivered on Monday to Gov. Mills, Senate President Troy Jackson (D-Aroostook), House Speaker Rachel Talbot Ross (D-Portland), and members of the Joint Standing Committee on Appropriations and Financial Affairs.
The report was authored by Darryl Stewart, the Acting State Budget Officer.
Maine’s state constitution requires a balanced budget, but there has been no indication yet from the governor or any lawmakers as to how that might be achieved given the magnitude of the projected shortfall.
Projected General Fund Shortfall
The General Fund revenue for the 2026-2027 biennium is projected to total approximately $11.02 billion, while expenditures are expected to reach $11.67 billion. This results in a projected shortfall of $636.7 million. The fund’s revenue sources include a mix of taxes, transfers, and other revenue streams.
Expected Revenues by Source (2026-2027 Biennium):
- Sales and Use Tax: $4.68 billion (42.5% of total revenue)
- Individual Income Tax: $5.23 billion (47.5%)
- Corporate Income Tax: $848 million (7.7%)
- Cigarette and Tobacco Tax: $320.6 million (2.9%)
- Insurance Company Tax: $267.4 million (2.4%)
- Other Taxes and Fees: $281.8 million (2.6%)
- Service Provider Tax: $89 million (0.8%)
- Transfers (including Lottery and Tax Relief): Net of -$182.1 million
Additional sources contribute smaller amounts, such as the Inheritance and Estate Tax and fines, forfeits, and penalties. Adjustments for municipal revenue sharing and transfers to the Highway Fund are also factored in, according to the DAFS report.
Highway Fund Revenue Shortfall
The Highway Fund is projected to have revenues of $1.01 billion for the 2026-2027 biennium, with anticipated expenditures totaling $1.33 billion. This creates a budget gap of $312.5 million.
Expected Revenues by Source (2026-2027 Biennium):
- Fuel Tax: $421.3 million (primary revenue source)
- Motor Vehicle Registrations and Fees: $195.1 million
- Sales Tax Transfer (related to motor vehicles): $236.1 million
- Liquor Operations Fund Transfer: $118 million
- Other minor sources include inspection fees, fines, and miscellaneous taxes.
The DAFS report is based on the most recent revenue forecasts from the Revenue Forecasting Committee (RFC) and includes updates to reflect any legislative actions from the 131st Legislature’s Second Regular Session.
As Maine’s state constitution requires a balanced budget, the legislature and Gov. Mills will need to make nearly $1 billion in adjustments — either cutting costs or raising new revenues — in order secure a constitutionally sound budget for the two years following Mills’ exit from the Blaine House.
The projections and underlying assumptions in the report will play a key role in shaping the state’s budget discussions for the 2026-2027 biennium as lawmakers consider various policy and funding strategies to address the anticipated gaps.
Here is the full report submitted on Sept. 30, 2024 by DAFS Commissioner Kirsten Figueroa:
