AUGUSTA, Maine — Among Gov. Paul LePage’s top complaints about the Legislature is how it deals with extra money in the state budget.
The surplus revenue, which totaled nearly $93 million at the end of the state’s fiscal year on June 30, accumulates when tax revenues come in higher than expected and when state departments don’t spend all of the money in their budgets.
For years, that money has been allocated in what is known as the “budget cascade” to programs that are funded only when there is extra money to fund them. LePage has said he wants to eliminate the cascade, frequently telling a story about how there are millions of dollars left over in state government on June 30 of each year that is spent by lunch time on July 1.
“Unfortunately, the surplus disappeared overnight because we have a thing in Maine called cascading,” LePage said recently to MPBN.
Why the cascade?
The extra money has to go somewhere. As a technical budgetary matter, excess revenue needs to be appropriated. LePage, whose office did not respond to a request for comment for this story, has said he wants most or all of the money to go into the state’s Budget Stabilization Fund, which is known commonly as the rainy day fund. The purpose of that fund is to cover drastic drops in tax revenue — and to avoid major cuts in state programs in services — when the economy tanks. States with flush savings accounts typically score better credit ratings, which makes it possible to secure lower rates for bonds.
Lawmakers want to fund important programs. Implemented by statute in 2005, the cascade is a way of routing money to programs that aren’t supported through the General Fund. According to data from the Legislature’s Office of Program and Fiscal Review, since 2011 those programs have included the governor’s contingency account and a range of reserve accounts for loan insurance, health insurance programs and retirement reserves.
This year, excess revenues were allocated as follows and in this order of priority, according to the Department of Administrative and Financial Services. Some of these are a result of the cascade and others were for individual bills enacted by the Legislature.
— $70.8 million carried forward as part of the fiscal year 2017 budget.
— $348,000 to restore LePage’s contingency account to the maximum $350,000.
— $1 million to the Loan Insurance Reserve Fund.
— $2.5 million to the Reserve for General Fund Operating Capital.
— $4 million to reduce the unfunded actuarial liability in the Retiree Health Insurance Fund.
— $13.4 million to the Public Utilities Commission’s Cost Recovery Fund, which resulted from a late-session bill designed to bail out Maine’s biomass industry.
When there is extra money left after those expenditures, 80 percent goes to the rainy day fund and 20 percent goes to a fund that is meant to provide tax relief. This year, $707,000 went to the rainy day fund, and about $177,000 went to the tax relief fund.
Why deposit to the rainy day fund?
LePage has long argued that the fund should contain up to 18 percent of total General Fund revenues. The fund reached its highest balance of $144 million in 2001, which at the time represented 6 percent of General Fund revenues. The fund balance was decimated after the Sept. 11, 2001, terrorist attacks and drawn down to just $195,000 after the Great Recession hit in 2008.
Earlier this year, LePage proposed moving nearly $73 million in surplus revenues to the rainy day fund, which would have brought the balance to $183 million, but the Legislature pared that proposal to $10 million.
“Using this one-time revenue to significantly increase the balance of the Budget Stabilization Fund is good public policy,” Finance Commissioner Richard Rosen argued in support of the bill.
Democrats say no. In his public appearances and during a memorable news conference outside LePage’s office last year that included a Christmas tree and LePage brandishing rubber pigs, the governor implied that the state budget was full of “pork” and “pet projects” for lawmakers. Rep. Peggy Rotundo, D-Lewiston, a veteran of the Legislature’s budget committee, said that isn’t the case. In fact, she said the cascade was changed this year according to LePage’s wishes.
“Maybe that happened in the past, but in recent years the things that money gets designated for are important investments the state is making,” Rotundo said. “This is just him wanting to make us look like we use this money irresponsibly, and that’s absolutely not true. We’re really trying to invest in the future.”