Governor Mills’ budget grows Maine government to unsustainable levels


February 11, 2019
Contact: Jacob Posik
Director of Communications
Office: 207.321.2550
Cell: 207.240.7064

PORTLAND – The budget proposal released last Friday by Gov. Janet Mills is not a reasonable approach to state spending over the next two years. The proposal amounts to a costly and substantial expansion of state government; $8 billion in spending over the next biennium, nearly $800 million of which comes as new spending, an 11 percent increase over the last budget.

“This two-year budget proposal is a reckless and irresponsible step backwards for Maine,” The Maine Heritage Policy Center Chief Executive Officer Matthew Gagnon said. “It will take us back to the days of uncontrolled spending and busted budgets, and will set the stage for future tax increases.”

The first budget signed by former-Gov. Paul LePage totaled $6.1 billion. Before leaving office, the last budget approved by LePage totaled $7.2 billion, an increase of about $1 billion in annual spending over an eight year period. Gov. Mills’ budget proposes $800 million in new spending in the first biennium, or nearly four-fifths of new spending under LePage’s tenure.

According to the documents and statements released last Friday, Gov. Mills is prepared to spend approximately $150 million over the next biennium on Medicaid expansion. This exceeds the initial estimate of $55 million annually that was developed when the Medicaid expansion initiative appeared on Maine’s ballot in 2017. This estimate reflected a total of 70,000 Mainers receiving coverage under the program.

There are more than 3,200 Mainers currently enrolled in expansion, according to media reports. The budget does not outline a long-term funding source for Medicaid expansion; it relies extensively on future revenues as projected by Maine’s revenue and economic forecasting committees. 

Instead of returning surplus revenues to taxpayers in the form of tax reductions, Gov. Mills’ proposal relies on nearly every penny of projected revenue over the next biennium, about $7.9 billion, with just $383,000 to spare after using a number of one-time funding sources and leftover surplus funds. 

“Gov. Mills is pitching this to the Maine people as fiscal restraint, but nothing could be further from the truth,” Gagnon said. “It spends nearly every penny of the money she thinks the government will take in over the period. If revenues are even marginally below expectations, she will have no choice but to raid the rainy day fund or raise taxes.”

The increase in revenue sharing, which is distributed to Maine’s cities and towns, is less than the five percent goal outlined by the governor’s allies and is being sold as a mechanism to provide property tax relief. However, no property relief occurs as a result of revenue sharing unless a municipality chooses to use revenue sharing funds to reduce the property tax liability of its residents.

A report MHPC published in 2015 shows that local governments consistently use revenue sharing funds to increase spending, not cut taxes. As Gov. Mills mentioned in her remarks, municipalities have priorities other than property tax relief. Towns and cities across the state will use these funds to grow their operations and, as a result, rely on and call for larger revenue sharing increases in the future to provide services well beyond their fiscal and economic means.

While the budget includes an additional $126 million for K-12 public education, it reaches the state’s 55 percent funding requirement for public education by using the same formula that Maine progressives criticized the LePage administration for using. As we noted when lawmakers agreed to spend an additional $162 million on public education to end the shutdown in 2017, throwing more money at a struggling system will not meaningfully improve public education for students in Maine schools. The four-year plan to pursue universal pre-K will prove to be a costly endeavor that will leave Maine taxpayers poorer and our children no better educated.

Gov. Mills stated proudly last Friday that her budget does not increase taxes or use the Budget Stabilization Fund, but a hiccup in our economy could result in future tax increases since this proposal relies so heavily on anticipated revenues. And while the proposal does not appropriate funds from within our rainy day account, an economic downturn could result in its extensive use. Gov. Mills’ budget proposal does not dedicate new funds to Maine’s rainy day account.

Spending almost every penny of projected revenue over a two year period, when taking on new initiatives such as Medicaid expansion and universal pre-K, is irresponsible and jeopardizes the strong fiscal condition of our state. Overall levels of spending in Gov. Mills’ budget proposal are far too ambitious for Maine over the next two years.

Her decisions to expand Medicaid and put Maine on the path to universal pre-K will grow government dependency in Maine and put taxpayers on the hook for future tax increases unless revenues hold, for the next several years, at the levels projected over the next biennium, and until both programs are fully implemented.