A masked woman cross an Old Port crosswalk in Portland's Old Port on Thursday Dec. 3, 2020. Credit: Troy R. Bennett / BDN

A torrent of federal money kept Maine’s economy afloat during the sharp, pandemic-induced recession this year, but experts warn of economic hardship without further aid that could prompt additional layoffs and business closures, prolonging the economic downturn even if a vaccine is widely available by next summer.

Unemployment skyrocketed in the spring as the coronavirus forced businesses across the state to shut their doors. It has remained well above pre-pandemic levels this fall, with job prospects bleak as virus cases rise heading into winter. A Census survey in late November found a third of Maine adults were struggling to pay basic household expenses.

Despite those challenges, the worst effects of the pandemic-induced recession were muted by $8.9 billion in virus-related stimulus money that flowed into Maine this year, led by aid to businesses and individuals from the $2.2 trillion CARES Act that passed in late March. Whether additional help arrives in the coming months could dictate how quickly the state’s economy bounces back in a post-virus landscape.

“It was sort of like the CARES Act was half a bridge over a chasm, and we haven’t gotten the second half,” said Michael Hillard, an economics professor at the University of Southern Maine.

The largest source of federal aid flowing into Maine this year was the Paycheck Protection Program, which offered $2.3 billion in forgivable small business loans, followed by federal unemployment benefits and stimulus checks.

While many businesses benefited from PPP loans earlier in the year, they now face challenges heading into winter, said Greg Dugal, a lobbyist for HospitalityMaine, which represents hotels and restaurants. The forgivable loans only covered eight weeks of expenses, and many establishments are still operating at reduced capacity as coronavirus cases continue to rise.

With shrunken savings after a shortened summer, some businesses could struggle to cover expenses this winter. A second round of the program has been discussed as part of another stimulus package, including in a proposal introduced by Sens. Angus King and Susan Collins this week, but is far from a certainty.

“If we don’t get any money, you’ll see a quarter of the industry gone, for sure,” Dugal said.

The hospitality industry is not the only one hoping for additional aid as part of a new stimulus bill. Enhanced unemployment benefits — which brought $1.3 billion into Maine’s economy, according to state data, and continue to aid more than 30,000 Mainers each week — are set to expire in late December.

The window for Maine to use $1.25 billion in CARES Act funding also closes at the end of the year. As of earlier this week, the state had committed all but $100 million of that funding, with the plurality going to aid for businesses.

However, Maine and other states were barred from using stimulus money to backfill lost revenue. Despite better-than-expected tax revenues over the past few months, Maine is still staring down a projected $650 million deficit through mid-2023.

Without federal aid to backfill revenue, the deficit leaves state and local governments with few options, said Hillard, the USM economist. Lawmakers could raise taxes, an unpopular move during a recession that could slow growth, or they could try to cut costs, which would likely result in more layoffs.

Public sector layoffs would likely trigger a “multiplier effect,” said Hillard, referring to a pattern where jobless workers spend less money, hurting business revenues and sparking additional layoffs in other industries, which only exacerbate the downturn. He noted that Maine took that route with budget cuts following the Great Recession, contributing to years of slow job growth.

News that a vaccine could be approved later this month provides restaurants, hotels and other businesses with some hope that they could return to normal operations by next summer, Dugal said. But they still have to figure out how to survive a winter with diminished capacity, less money saved from the summer to tide them over and increasing virus cases.

“There’s a light at the end of the tunnel,” Dugal said, “but we have to get there.”