AUGUSTA, Maine — Gov. Janet Mills released a $8.4 billion budget proposal Friday that largely holds state government spending flat while increasing education spending and a key reserve fund.
The Democratic governor’s administration promised a budget that would “constrain spending” and avoid new taxes. The document Mills debuted does that for now. While the last two-year budget signed by Mills in 2019 came in just under $8 billion, spending has increased since, partially due to collective bargaining agreements with state employees.
The new budget comes in at roughly $57 million more than the current spending level, according to materials provided by the Mills administration on Friday. Biggest-ticket items include adding $61 million to the state’s rainy day fund between now and mid-2023. Mills is also proposing increasing education spending by $45 million to the education budget, upping the state’s share of essential school costs only slightly 51.78 percent to 51.83 percent.
“To me, it’s a no-nonsense, no-drama document, plain and simple,” Mills said during a Friday briefing with reporters.
An additional $25 million more is proposed for a Medicaid reserve fund. Lower-than-expected costs and an increase in federal matching rates left Maine with unspent Medicaid funds in the first quarter of this year, which could go toward reducing shortfall expenses. Maine has seen more people use that system during the pandemic, notably MaineCare expansion, which rose to 70,000 enrollees this January. Increased federal matching rates came with a requirement to to keep people on their rolls, reducing the typical churn in the program.
The budget proposal will drive the conversation in Augusta through much of the year as Maine tries to navigate increasing case counts and an uncertain economic future. Minority Republicans in the Legislature signaled relief that Mills was largely holding the line on spending, but they have been skeptical that the budget will hold without cuts.
While the revenue picture is unclear, a new projection is not due until late spring, making it likely that the dollar marks in proposal released today will undergo changes before year’s end.
The possibility of additional federal aid could also change things. Mills did not speculate on that possibility, however, saying the budget was “real” and not a placeholder, saying the state must “be realistic based on today’s figures, today’s revenues and today’s necessary expenditures.”
The total reductions in spending were not immediately available, but a curtailment order Mills signed last fall included $125 million in efficiencies — reduced employee travel and not filling some open positions — and pulling $70 million from a reserve fund containing liquor revenue. The latter requires legislative approval and is in an immediate spending plan unveiled Friday.
Despite a $650 million shortfall through mid-2023, Maine tax revenues have weathered the pandemic better than many states. But rising coronavirus cases, an expected drop in spending and uncertain projections through the winter months could put a damper on revenues as the year progresses and make the budget difficult to navigate.
Mills would put an additional $5 million toward the Maine Center for Disease Control and Prevention this year to bolster testing, vaccine distribution and support for those in quarantine and isolation.
Democrats praised the proposal as a good starting point. Sen. Cathy Breen, D-Falmouth, said that process will be “challenging” but that she believed the Legislature could produce a budget that will “pay our bills, invest in our future, protect our natural resources, and safeguard essential services like public education and health care.”
Republicans were encouraged by the mostly flat budget, but cautious about passing judgment without seeing a full outline. Senate Minority Leader Jeff Timberlake, R-Turner, said he was concerned by Mills’ use of one-time funds like the liquor fund, saying that while use of reserves is not unusual, they are only a one-time solution that will require future replacement.
“You can’t live on curtailments,” he said.