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Politics

Janet Mills Unveils $8.4 Billion Two-Year Budget With Few Spending Increases, No Tax Hike

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Robert F. Bukaty
/
Associated Press
Gov. Janet Mills on Tuesday, Jan. 7, 2020, at the State House in Augusta.

Gov. Janet Mills is proposing a two-year budget of $8.4 billion, a spending plan bolstered by federal pandemic relief funding and better-than-expected revenue forecasts.

The proposal covering the fiscal years 2022-2023 represents an increase of less than 1% over the current budget, or about $57 million. The plan does not change tax rates, nor does it pull money from the state’s budget stabilization fund.

"There aren't any dramatic changes in this budget. There aren't any major programs or sticking points as you might call them. To me it's a nonpolitical document. It's a no-nonsense, no-drama document, plain and simple," Mills says.

New spending initiatives include $3 million in new funding for the Maine Center for Disease Control and Prevention to ramp up the state’s vaccine program, which is set to roll out mass immunizations to stem ongoing outbreaks of COVID-19. An additional $5 million is going to the CDC in the governor’s supplemental spending plan for the current fiscal year.

Other initiatives in the two-year budget include:

  • $7.5 million for mental health and substance use disorder services and $2 million for a program that sends response teams to regions of the state experiencing high rates of drug overdoses.
  • $45 million for K-12 public education to assist school districts as they continue remote, in-person and hybrid learning during the pandemic. The funding will also go toward the governor’s goal of establishing a minimum teacher salary of $40,000.
  • $6 million for services for adults with developmental disabilities, an initiative that the governor says will open 30 more slots in the program per month.
  • $45 million for MaineCare rate increases for nursing facilities, residential facilities for children and older Mainers, services for adults with intellectual and developmental disabilities.

In a press statement, Mills said the budget proposal is meant to focus on education and public health.
“At a time when Maine people are hurting, when small businesses are struggling to keep their doors open, when the ranks of the unemployed have swelled, and when we are fighting a deadly virus all around us, we are proposing a balanced budget that tightens our belt, that protects support for children’s education, that saves, and that reinforces public health, child welfare, and public safety measures of great concern to Maine families,” she said. “We are focused on keeping Maine people healthy, saving lives, educating our kids, and getting people back to work.”

Mills also proposes to build the state’s rainy day fund by $61 million over three years, bringing it up to $320 million as a hedge against financial uncertainties created by the pandemic.

Maine Public chief political correspondent Steve Mistler broke down the proposal with All Things Considered host Nora Flaherty.

This interview has been edited for clarity.

Flaherty: Let’s start with some of budget basics before we get to some of the numbers. This spending plan is a proposal and it’s likely to undergo some significant changes once the Legislature begins working through it, correct?

Mistler: That’s right. You’ve probably heard the expression “governors propose budgets and legislatures dispose,” and that’s really a succinct way of describing the process. What we have today is a budget document that the Legislature will change as Democrats and Republicans negotiate increases in spending or cuts that they want in there. And that dance between the parties will take many weeks and months before they come up with an agreement.

As always, the goal is to pass a budget before the end of the fiscal year that ends June 30. If the Legislature doesn’t do that, the state government will shut down, which has happened only twice before, the most recent being 2017 when it closed for a few days because of a stalemate. The hope is that that we won’t get to that point. Democrats control the House and Senate, but Republicans will play a key role in getting this budget over the finish line.

We’ve been hearing for months that the pandemic and the restrictions to help curb outbreaks had a pretty big impact on the Maine economy. Is that reflected in the governor’s proposal?

It is, but not in the way one would expect. She’s essentially put forward an $8.4 billion spending plan that’s three quarters of a percent higher than the two-year budget we’re currently working under. In terms of dollars, it’s an increase of about $51 million.

But the big takeaway here is that there’s no dramatic spending cuts, no tax increases and no new programs. It basically holds the line and includes a few modest increases, primarily in public health and public education.

But hasn’t the pandemic created a big revenue gap? I thought it was something in the neighborhood of $1 billion?

That’s right, but that shortfall was based on revenue estimates from the summer that have since improved, resulting in a $630 million shortfall over the next three years instead. That’s still a big number for the state of Maine, but a few things have happened to soften the blow.

The big one? The $7.6 billion in federal aid that came to the state after Congress passed the big COVID-relief bill last spring. That spending package really helped Maine navigate a stalled economy. It provided forgivable loans to businesses, there were direct payments to residents and there was additional money in the unemployment program. All of that is really important and probably the biggest reason why this budget doesn’t have massive program cuts in it.

Another reason: In October, Mills signed a curtailment order of about $220 million that trimmed spending throughout the state bureaucracy. We’re talking about hundreds of nips and tucks in spending that added up to hundreds of millions of dollars that helped the state limp along through the fall. Some of those savings are continued in the new two-year budget plan.

And the third reason is that revenue projections have since changed for the better, which means that massive shortfall is significantly less than anticipated. This budget is built on those improved forecasts.

But are revenue forecasts basically estimates? And doesn’t that mean this budget proposal is leaning on revenues that might not actually materialize?

Absolutely. There is a science to those projections, but they’re still projections. And those projections could be more volatile this year. The key variable — the real wild card — is the pandemic. The new projections are based on basically a steadily improving economy. But the economy will only improve if the impact of the pandemic lessens.

Now, it could. Vaccine rollout is underway and if it actually goes according to plan, it seems realistic that the economy will gradually get better. If it doesn’t, then Maine is going to need more federal help. And it might get some more help anyway now that Democrats will soon take control of the White House and Congress.

A more robust relief package could be coming. More direct payments to residents could be coming. If all of that happens and the pandemic is brought under control, then the state’s economic outlook will get even better. But that’s a big if.