AUGUSTA, Maine — Gov. Janet Mills will propose a mostly flat state budget avoiding tax increases on Friday when she unveils a spending plan through mid-2023 that must account for the coronavirus pandemic’s effect on the economy, a top state official said.
The budget proposal from the Democratic governor will frame much of the next two years in Maine politics. Estimates of how the pandemic would affect revenue are not as grim as they were in the spring, but legislators still have to finagle a massive $650 million revenue shortfall that has been projected by the state over the next three years.
Federal funding, cost-cutting measures and improved revenue projections will help the state prevent major budget reductions this year and through the next two years, said Kirsten Figueroa, the governor’s budget commissioner, in a Thursday interview. An immediate spending proposal and a two-year budget will be presented as one package, she said.
Figueroa only agreed to generally outline the budget and did not provide specifics on the final amount or some controversial elements of state spending. The last two-year budget negotiated between Mills and the Legislature in 2019 came in just under $8 billion after minority Republicans could only negotiate the spending level a bit under what the governor proposed. They have already called for major spending reductions that could be main sticking points.
The budget commissioner highlighted the difficulties of pulling together the budget — already a multi-month, laborious process — amid uncertain revenue projections and an unstable economy.
“We routinely come screeching in on two wheels with the budget, with minutes to spare,” she said. “In this instance, it’s going to be seconds to spare.”
Austerity measures including reduced employee travel and a partial hiring freeze are expected to continue under the new proposal. Figueroa said every department will see the effects of those efficiencies, describing the process as “full scrubbing of the budget.”
Although the state has $258 million in its rainy day fund, Figueroa said the proposal will not touch that revenue pool. Mills asked the department to see if it would be possible to add to the fund, Figueroa said, although she did not say whether the final proposal would do that. Mills’ office did not respond to request for comment.
Republicans on the budget committee were cautiously optimistic but wary of commenting much, saying they would not be briefed on the budget until Friday morning. Sen. Paul Davis, R-Sangerville, declined to comment beyond saying no tax increases would be “great.”
Rep. Amy Arata, R-New Gloucester, expressed a desire to work with the governor and she would be happy if Mills kept her 2018 campaign promise to not raise taxes, but felt it would be difficult to cover the shortfall without spending cuts and would like some included.
“It’s not realistic to keep the budget flat-funded for long,” Arata said.
The budget will be mulled over after Congress approved a smaller federal aid bill in December than the massive federal stimulus in March. Neither included direct relief to state and local government, but states were allowed to use much of it to offset pandemic-related spending.
Federal aid covered $227 million in state government activities and $508 million in education spending last year. Figueroa said she has not yet fully understood the effects the newest package will have, but said the state will continue to watch what Congress does while keeping an eye on how revenue projections change in late spring.