The Maine Budget Forecasting Committee recently released its December 2026-27 highway fund revenue forecast, estimating that Maine will face an approximately $280 million shortfall in highway fund revenue. This means that if Maine does nothing, in 2026 and 2027, the Maine Department of Transportation will spend $280 million more dollars than it brings in. While going into debt is an option for the federal government, this is an immediate problem for Maine, as we have a balanced budget requirement.
Some have seen this upcoming problem and proposed several unwise or ineffective solutions to it, from bonds to gasoline tax increases. None of these are effective long-term solutions, and the only way to solve this problem in the long-term is to assign a reliable source of future revenue. The best way to do this is to expand the vehicle sales tax revenue going to the highway fund from 40% to 100%, a solution with immediate effect and long-term viability.
So far, much of the discussion on the transportation funding shortfall proposes to either increase the state gasoline tax or to fund it with bonds. Both of these are unwise solutions, and both are coming from opposite sides of the political aisle in Augusta.
Of course, people on the left are proposing to increase the gasoline tax, which has been stable since 2011. The hypocrisy of thinking this is a long-term solution to our problems comes, of course, from the advocacy of many Maine Democrats for reducing the total emissions from gas-powered vehicles. While the policies they support to pursue this vary, from EV mandates to subsidies for EV chargers, the overall effect is universal: they reduce the amount that Mainers spend on gasoline. These same people also believe that a transition to electric vehicles is inevitable. In their support for a gasoline tax, they seem to be treating it as a means towards killing off Maine’s gas-powered vehicles rather than creating a long-term revenue stream for highways.
On the other hand, some Republicans have alluded to the possibility of filling in the shortfall with a bond, which is essentially the government taking out a loan. This, of course, is also a bad long-term solution, as it provides negative future revenue due to the interest the government would be expected to pay on such a bond. The only benefit of a bond is that it would not increase Mainers’ current tax burden like a gas tax would. Nonetheless, both of these “solutions” have significant drawbacks that outweigh their potential benefits.
However, Maine has run into this problem before, and when the Highway Fund needed revenue in 2023, Gov. Janet Mills signed a bill dedicating 40% of vehicle-related sales tax revenues from the General Fund to the Highway Fund. The current 40% figure of automobile-related sales taxes would generate about $236.93 million in the next budget cycle, and increasing that percentage would be the best way to close this shortfall. Increasing the revenue percentage to 100% of the vehicle sales tax would add an extra $355.4 million to the transportation budget, immediately closing the gap.
Alternatively, increasing this to roughly 87% of vehicle sales revenue would close the upcoming transportation budget shortfall entirely and allow any remainder to go to other projects. This would require cutting other spending from the General Fund, but as Gov. Mills has said already, we should expect a “lean budget.” Further, Maine’s overall spending increased by $1.05 billion a year between 2019 and 2023, and during that time, General Fund expenditures grew from $3.7 billion to $4.3 billion.
While legislators will make it seem like we’ve always been strapped for cash during the upcoming budget battles, the truth is that Maine has been spending way too much in recent years. Reducing some of that spending to support transportation funding would simply be a step towards a healthier fiscal future.