Gov. Janet Mills released a two-year, $11.6 billion budget proposal on Friday that she said protects “core commitments” made by state government in recent years while trimming spending in other areas.
Mills said her proposal is a “balanced approach” that includes both investments in areas like education and health care but also some programmatic changes. While Mills is not proposing any changes to Maine’s income tax, she is floating the idea of increasing the tobacco tax for the first time in 20 years as well as increasing the sales tax on recreational cannabis and taxing video streaming services.
Like many states, Maine is seeing the flow of revenues start to level off after years of steady growth, as predicted. At the same time, the massive infusions of federal dollars into state coffers that began during the pandemic are ending.
The result is that Maine's budget experts are predicting a roughly $450 shortfall over the next two years based on revenue projects and current spending obligations. Mills said her 2-year plan as well as a short-term budget through June 30 fills that gap as well as an immediate, $118 million shortfall in MaineCare, which is the state's Medicaid program.
"The biannual budget proposal is balanced, first of all," Mills said during a press conference at the State House. "It maintains critical investments in Maine people. And at the same time, the budget proposal was also one of the most difficult we've had to deal with because it reflects budget realities that have forced us to make some tough choices.
Mills' proposal will likely serve as the building block as state lawmakers craft a final spending plan over the next several months. While the Legislature is controlled by Democrats, their majority is slim and Republicans are expected to push back hard against additional spending as well as any attempt to increase taxes.
Mills' budget plan would, among other things:
- Fund 55% of K-12 education costs — a requirement under state law that was never met until a few years ago.
- Continue providing up to two years of free community college to recent high school grads.
- Fully fund the free school meals program for all public, K-12 students.
- Keep returning 5% of tax revenues back to municipalities through “revenue sharing,” which alone accounts for more than a half billion dollars.
- Increase state support for public colleges and universities by 4% or $41 million.
But to trim costs, the administration has proposed scaling back the monthly stipends — begun during the pandemic — to child care workers. The budget plan would also trim $132 million from current obligations by suspending cost-of-living adjustments to direct care workers through MaineCare.
Mills is also proposing to avoid nearly $8 million in expenditures by eliminating “food stamp” benefits to non-citizens, such as asylum seekers, who are authorized to work but are unemployed.
Overall, the budget proposes spending approximately $400 million less than would be required to fully fund all programs in the current budget. Despite those reductions, however, state spending would still increase by roughly $1.1 billion over the current budget.
Republicans quickly seized on that increase. In the past, GOP leaders have accused Mills and the Democratic leadership of “reckless” spending habits.
House Republican Leader Rep. Billy Bob Faulkingham of Winter Harbor seemed comfortable continuing to cover 55 percent of K-12 education costs and providing free community college to recent high school graduates. But Faulkingham said he was surprised by the size of the budget.
"We have a revenue forecast that says we are $450 million short of where we need to be, yet this new budget proposal is going to grow the state budget to $11.6 billion," Faulkingham told reporters. "That's a billion dollars, budget-to-budget."
Maine’s revenue forecasters recently revised their projections to say that the state will take in roughly $200 million more than originally projected. Mills plans to tap that surplus and supplement it with additional “targeted revenues.”
One new revenue source proposed by the governor would come from a $1-per-pack increase in Maine’s cigarette tax, which currently stands at $2. Taxes on other tobacco and nicotine products, including vape cartridges, would also increase under the plan, generating an estimated $80 million over the biennium.
Maine currently has the second-lowest tobacco tax in New England and last increased the tax in 2005.
The administration has also proposed increasing the sales tax on recreational cannabis from 10% to 14%. The governor has also revived her previous proposals to levy a tax on video streaming services. Republican Gov. Paul LePage also proposed such a tax only to see it defeated.
Faulkingham indicated that his party was not interested in any tax hikes.
"We are already one of the highest taxed states in the country so we don't really see a need to increase any taxes," Faulkingham said. "We need to cut the size of government."
Mills preemptively defended her budget's spending priorities, saying costs are up across the board and the state is making much-needed investments.
"Every Maine family knows that costs of living are rising," Mills said. "We'd like to see that leveled off, of course . . . But we are balancing the revenues coming in and the money going out, pure and simple. Budgeting 101."
Democratic legislative leaders and members of the budget-writing Appropriations and Financial Affairs Committee, which crafts the 2-year budget, thanked the governor for the proposal but largely steered clear of endorsing or rejecting what are likely to be the most controversial provisions.
"The committee looks forward to reviewing the details of the governor's proposal closely and beginning the process of inviting public comment, so that the budget passed by the Legislature reflects Maine values and helps us meet the challenges we face," Rep. Drew Gattine, a Westbrook Democrat who co-chairs the Appropriations Committee, said in a statement. "I appreciate that the Governor has proposed a budget that is balanced and works to maintain essential programs and services."
“Governor Mills’ budget proposals recommit to the historic progress we’ve made in recent years to support working Mainers and their families,” Senate President Mattie Daughtry, D-Brunswick, said in a statement. "Most notably, the proposals keep our promise to fund 55% of K-12 education, guarantee free community college, and continue 5% revenue sharing with municipalities. In the coming weeks and months, the members of the legislature’s budget committee will dig into the details and—after gathering input from their legislative colleagues and the public—find commonsense solutions that address our state’s most pressing needs."
