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As Maine lawmakers push toward adjournment of the legislative session later this month, one of the last items they will debate will be a supplemental budget. This year, thanks in part to an infusion of federal funds to help the state weather the COVID pandemic and to the economic recovery that has accompanied the easing of the pandemic, state legislators have to decide how to allocate “extra” money.
When higher than expected state revenues were first announced earlier this year, some Republican lawmakers and Gov. Janet Mills began contemplating how to return a significant amount of that money to the state’s taxpayers. In her State of the State speech, Mills proposed a $500 check for most Mainers. With subsequent forecasts in March of even higher state revenues, the governor has increased this to $850 checks.
The governor’s changes to her proposed supplemental budget also included increased investments in behavioral health and affordable housing. It also calls for an allocation of $60 million to create a trust fund as part of the state’s response to the growing PFAS contamination problem.
“Inflation and increased oil and gas prices resulting from Putin’s invasion of Ukraine are hitting Maine people hard. This proposal will help Maine people grapple with these increased costs by putting money directly back into their pockets,” the governor said in a press release last month that announced her suggested changes to the revised spending plan she released earlier this year. “From direct relief to investments in behavioral health, this revised budget proposal helps Maine people through this difficult time, tackles pressing problems, and lays the foundation for strong economic growth.”
The governor’s changes came after Maine’s nonpartisan Revenue Forecasting Committee in March upgraded the State’s General Fund revenue forecast by an additional $411.7 million for the current biennium, which ends June 2023. Previously, the committee projected that state revenues would be $822 million higher than expected.
These projections rightly prompted the governor and lawmakers to assess where Maine should allocate this money, with a strong push to return some of it to taxpayers.
As we wrote in February, there is a case to be made that Maine doesn’t have a budgetary surplus. In theory, it’s hard to claim the state has extra money when it has so many needs that remain unfunded, including waiting lists for behavioral health services and a significant backlog in unfunded transportation projects.
However, the state Constitution requires a balanced budget, so financial allocations and revenues must be the same. With higher than expected revenues, that money must be allocated so that the state’s budget remains balanced since the state can’t carry forward a surplus.
To be clear, this surplus comes from a budgetary projection, which could change – especially as national and global events impact the economy. For this reason, the additional expected revenue is considered a “one-time” event and is not predicted to be ongoing, so there is a good argument to be made against dedicating it to ongoing expenses or programs.
We understand calls from progressives to devote some of the “surplus” revenue to underfunded programs and services. But, this would be a risky move that could necessitate cuts to these programs and services in the future.
Likewise, permanently lowering the state’s income tax, or a suspension of the gas tax, would likely lead to budget gaps in the future.
The governor’s plan to send some money to taxpayers to help offset higher costs for fuel, electricity, food and other essentials, coupled with investments in education, housing and health care – and setting aside funds to deal with the growing PFAS contamination problem – is a prudent way to use the surplus revenue.
The next important step for lawmakers is to approve the budget plan with a two-thirds majority vote so that the $850 can get to Mainers as quickly as possible.