‘Fiscal restraint’ merely a slogan for Mills’ supplemental budget
In the first iteration of her supplemental budget proposal, Governor Mills made clear her intention to create a new budget reserve to plan for the future, marketing the plan as “fiscal restraint.” This was reaffirmed last Friday when she released her proposed change package which left this reserve intact.
The process works by placing $107 million in a “General Fund Reserve Account” and automatically adding that sum back into the state’s General Fund at the start of the 2025 fiscal year. Her stated goal is to practice fiscal restraint so Maine can continue to fund its many current programs, and her budget language describes it as simply being earmarked for “future funding needs.”
This is a monumental policy fumble, one caused by a problem of Mills’ own invention. The governor should give that money back to the people of Maine instead of forcing it haphazardly into Maine’s future budget when our state already has both a roughly decade-long line of surpluses and a rainy day fund maxed out at nearly $1 billion.
The balance of Maine’s Budget Stabilization Fund – also known as the rainy day fund – has grown steadily since 2012 and is now at its statutory cap. This rainy day fund is where most unused general revenue would go, with another 20 percent going to the Highway and Bridge Capital program, if left unallocated. Maine previously sent this money to other places, too, one being the Tax Relief Fund for Maine Residents. Under Gov. Paul LePage, this fund used to store 40 percent of surplus revenue that Maine didn’t spend each year for income tax relief. But in 2019, the fund was changed under Mills’ watch to instead affect property taxes, and was eventually repealed entirely in 2021.
Now that the rainy day fund is maxed out and the tax relief fund was previously eliminated, the only place left for our massive surplus to go is to the Highway and Bridge Capital Program. While improving and repairing Maine’s highways is admirable, combining it with income tax relief would be preferable, especially when our neighbors in New Hampshire pay no state income or sales tax at all. This is why the Tax Relief Fund existed in the first place, but now tax relief in any form – whether for income taxes or property taxes – won’t be realized because of Gov. Mills and the Legislature’s meddling.
However, Gov. Mills does not want unallocated funding to go towards highway and bridge improvements (or tax relief, for that matter). Thus, she created this $107 million reserve to effectively hide the funds and avoid the automatic cascade of Maine’s surplus. She is, in effect, burying the funds in a nonexistent account so Maine’s laws won’t force her to spend the money on other things.
Instead of amending the statutory ceiling on the rainy day fund, improving our highways or returning the money to Mainers in the form of tax relief, Gov. Mills wants to use this money to spend in the future on programs Maine has already signed up for in past budget cycles.
We know this because the next fiscal year is when her reserve fund automatically injects itself back into the General Fund. Her administration has refused to identify thus far which exact programs it anticipates will cost an additional $107 million, but it’s clear she prioritizes this over tax relief or highway improvements.
The only question that remains is whether majority Democrats in the Legislature will play along with the governor’s plan or find their own use for $107 million in surplus revenue.