A woman walks past the former Scarborough Downs horse racing track, where MaineHealth set up a 30,000 square-foot makeshift COVID-19 vaccination clinic, in this Wednesday, Feb. 3, 2021 file photo. Credit: Troy R. Bennett / BDN

Maine could receive $1.6 billion from the massive coronavirus relief bill, an infusion of funds that would be split between the state and the local governments within its borders.

The funding is eagerly awaited by state and local officials who argue that the money is needed to continue providing services, roll out vaccines and resurrect economies hobbled by the pandemic.

The slug of federal funding could also help Democratic Gov. Janet Mills navigate a political stalemate with legislative Republicans over taxes on pandemic loans to businesses, but that will depend on when the money arrives and whether Congress further limits how it can be spent. It could also prompt the governor to make changes to her two-year budget proposal.

The state and local government funding is included in a $350 billion provision that’s part of the $1.9 trillion spending package proposed by the Biden administration now working its way through Congress. Maine’s estimated share of the money is included in a spreadsheet produced by the House Committee on Oversight and Reform.

The document includes an estimated breakdown of how the money will be directed to Maine counties and municipalities, which would account for 40 percent of the funds, or $640 million. The remaining $1.04 billion would go to the state, potentially giving Mills funding options to provide additional tax relief for small Maine businesses that received Paycheck Protection Program, or PPP, loans during the pandemic.

Currently, Mills’ plan would match the full federal tax forgiveness benefit for businesses that received loans of up to $1 million. Businesses with loans of $1 million or more would get partial tax relief. Roughly 250 businesses fall into the latter category, including Maine Public Broadcasting Corp., which received a PPP loan for $1.3 million last year. Her plan uses $82 million in carryover funds from the 2021 fiscal year and surplus money originally directed to the state’s budget stabilization.

The governor’s plan to provide tax relief to 99 percent of the Maine businesses that received PPP loans has not satisfied legislative Republicans, who are pushing for the full, double tax benefit the program receives in the federal tax code. At the same time, Republican activists and groups like the Republican Governors Association are hoping the debate will hobble Mills if she seeks reelection next year.

The potential for electoral implications were in sharp focus when Mills originally proposed partial tax relief on PPP loans, citing its roughly $100 million price tag. Republicans, including potential 2022 challenger former Gov. Paul LePage, blasted Mills for not doing enough to help Maine businesses.

Mills made note of her proposal during her budget address this week, but Republicans continue to push for the full relief benefit, a stalemate that could jeopardize passage of a supplemental spending plan that will need GOP votes in order to go into effect immediately and in time for the 2020 tax filings.

At the same time, Congressional Democrats are racing to pass the Biden administration’s COVID relief bill, a sprawling initiative that includes the direct aid to state and local governments. House Speaker Nancy Pelosi recently said that the bill will clear Congress before March 14 — a deadline that also marks the expiration of extended unemployment benefits for millions of Americans.

The timing is important. Maine lawmakers will convene March 10 and 11 to take up bills that have cleared legislative committees. The sessions could also include votes on the supplemental spending bill that includes tax conformity, although the agenda has not been set yet.

It’s unclear whether Mills will deliver the full PPP tax relief if the federal aid package arrives in time. Her spokesperson Lindsay Crete said in a statement that the governor is looking forward to seeing what the federal COVID relief proposal ultimately provides.

“For now, tax season is nearly upon us and we continue to hear from small businesses and accountants who are looking for certainty,” Crete said. “The Legislature needs to resolve this issue now. The Governor has offered a reasonable compromise — one that provides tax relief to all Maine businesses that received PPP, including full relief to Maine small businesses — and she urges the Legislature to pass it.”

While Republicans and business groups are pressing Mills for the full tax benefit, the governor is also receiving pressure from liberal interest groups to reject PPP tax relief. Those same groups this week called on the Legislature to support increasing state revenues by $400 million to bolster an assortment of programs.

This article appears through a media partnership with Maine Public.