From Friday night through Saturday morning, the Legislature’s Appropriations and Financial Affairs Committee finalized the second part of Maine’s next biennial budget. This package significantly expands state spending and introduces new taxes, even as the state faces uncertainty in federal funding and a fragile economic outlook. 

The original biennial budget (arguably a triennial budget, since it incorporated a supplement for FY 2025) was pushed primarily by legislative Democrats. Part one brought total spending beyond $11.3 billion through FY 2027, and the now completed budget part two adds over $240 million in new appropriations, bringing the total budget to more than $11.54 billion.

While billed as a balanced update, this budget is a clear representation of  tax-and-spend governance. Here’s what Mainers need to know.

New Spending: Broad and Deep, But Not Strategic

Despite having only $130 million in projected revenue available and more than $120 in unfulfilled MaineCare costs, lawmakers approved over $240 million in new outlays. To cover the gap, they added a grab bag of tax and fee increases while sidestepping meaningful structural reform.

On the spending side, lawmakers approved a staggering array of additions that deepen the state’s fiscal commitments without any serious attempt at reform or prioritization. At the top of the list is a $123 million injection into MaineCare, a perennial budget sinkhole that continues to grow without structural change. Instead of asking how to make the program more sustainable, legislators simply threw more money at the problem.

Higher education spending also surged, with $46 million earmarked for the University of Maine System, largely tied to the implementation of the new paid family and medical leave law. This is a massive public outlay on a program that already threatens to burden Maine businesses with new payroll taxes and compliance costs. Yet again, taxpayers are being asked to spend millions on the growing cost of policies that were sold as helping those same Mainers avoid “financial hardship.”

The budget also sets aside $40 million to expand child care subsidies—another reversal of one of Governor Mills’ proposed cost-saving measures. And in a gesture that underscores just how casually lawmakers are now doling out cash, they approved $23 million in cost-of-living adjustments (COLAs) for certain MaineCare services—on top of nearly $8 million in increases already passed in March. These adjustments are not tied to performance or outcomes, but are simply added to keep up with political pressure.

Meanwhile, $20 million will be spent to continue the state’s “Free Community College” program—essentially a taxpayer-funded giveaway to institutions that are in desperate need of reform, not more cash. While many other states have free college, most of them establish income requirements and other guardrails, unlike Maine. Additionally, some establish long-term residency requirements, making Maine’s system expensive and easy to manipulate. This funding was $5 million less than Governor Mills requested, but it’s still a major spending increase with no guarantees of long-term results or accountability.

Adding insult to injury, $12 million more was shoveled into the General Assistance program, most of which will benefit Portland. This city already spends fifty times more per person than the rest of the state on General Assistance and received 88% of the state’s total General Assistance funding in 2022 and 2023. Finally, lawmakers also reversed Governor Mills’ proposal to rein in benefits for noncitizens on SNAP, instead allocating $5 million to maintain these state-funded payments, including for those not eligible under federal law. This is not compassion—it’s fiscal negligence.

Other initiatives include $5.9 million for free school meals, funds for Kennebec and Aroostook Counties crisis centers, and increased staffing for child welfare services and the state Legislature.

New Revenues: Targeting Consumers, Smokers, and Streamers

To balance the books, lawmakers reached into Mainers’ pockets in creative ways. The second budget package includes several new taxes and fee hikes, some of which disproportionately impact lower-income households:

  • Tobacco tax hike: Raising the cigarette tax from $2.00 to $3.50 per pack is expected to bring in $111 million over the biennium. This regressive tax falls hardest on working-class Mainers and is 50 cents higher than Gov. Mills’ original proposed one-dollar tobacco tax hike.
  • Streaming tax: A 5.5% sales tax on digital streaming services (Netflix, Spotify, Disney+, etc.) will generate an estimated $13 million through 2027.
  • Cannabis tax increase: Recreational marijuana’s sales tax jumps from 10% to 14%, projected to raise around $6 million.
  • Real estate transfer tax: The budget also incorporates a bill by Speaker Ryan Fecteau, LD 1082, which increases the transfer tax on property sales over $1 million, with 30% of new revenue routed to the Maine State Housing Authority. Notably, the average home price has been drastically climbing in Maine, with the average home price being $414,774 this year. Additionally, over one-thousand homes sold for a million or more in 2024, making up approximately 7.7% of the housing market.

These tax and fee increases  come when inflation remains elevated and federal aid is unpredictable. More importantly, none of the taxes are paired with significant offsets or reforms to reduce long-term spending pressures.

What Was Rejected: Some Cuts, Some Spending

Governor Mills’ attempts to trim certain budget items, like General Assistance, were largely rebuffed. The silver lining is that lawmakers rejected Gov. Mills’ proposed taxes on ambulance and pharmaceutical services, though they also blocked cuts to government childcare, Head Start, and state SNAP benefits. This resistance to meaningful belt-tightening leaves Maine with a budget trajectory growing faster than state revenues or population.

Conclusion: The Wrong Budget at the Wrong Time

Legislative leaders opted to spend now and tax later rather than using the second budget to right-size programs or prepare for leaner years. While some initiatives may be well-intentioned, the lack of restraint or prioritization is troubling. Mainers deserve a government that budgets like families do—by living within its means, planning for the future, and focusing resources where they’ll do the most good.

As always, Maine Policy Institute will continue to advocate for sustainable, accountable governance. With the end of the legislative session scheduled for this Wednesday, we urge lawmakers to remember: every dollar spent by the state is first earned by a taxpayer. Lastly, despite recent news coverage suggesting that the current budget was composed of “compromise,” the fact that it passed the Appropriations Committee with a simple party-line vote suggests that while this is the smallest Democrat majority in years, Republicans still had little to do with the final proposed budget.