Release: New Analysis of Maine’s Economy and FY 2022-23 Budget
FOR IMMEDIATE RELEASE
March 16, 2021
Contact: Jacob Posik
Director of Communications
Maine Policy Releases New Analysis of Maine’s Economy
and the FY 2022-23 Biennial Budget
PORTLAND, Maine – Maine Policy Institute released a new report today titled, “Long-term Growth vs. Short-term Gimmicks: Maine’s Economy and Governor Mills’ Second Biennial Budget”. The analysis examines the effects of the coronavirus pandemic on Maine’s economy and the corresponding impact on the state’s finances and next biennial budget. It also proposes a number of policy reforms that would result in substantial savings to taxpayers, increase state revenue collections, and grow Maine’s economy for the future.
While Maine is set to receive a large infusion of cash from the most recent federal stimulus package, these funds do not change the underlying economic reality in Maine: businesses are still reeling from the shutdowns and economic restrictions over the last year, its population is aging and its tax code is uncompetitive with the rest of the country, particularly our immediate neighbor, New Hampshire.
Today, inflation-adjusted General Fund spending per Maine resident is $3,108, the highest on record. Over the last 10 years, real spending on Maine’s General Fund has grown more than 20%, while the state’s population grew only 1.66%. If lawmakers kept real spending on pace with population since 2010, per capita spending would be $2,626 and taxpayers would have spent 18% less ($550 million) in the current fiscal year alone.
The current level and pattern of spending is unsustainable, particularly in the shadow of the pandemic. The tourism and hospitality sector, which makes up nearly 10% of the state’s economy, lost almost 20,000 jobs and 17.5% of personal income by November 2020. By the end of 2020, Maine had lost 50,000 jobs and 20,000 workers had left the labor force.
“After everything Mainers have endured over the last year, we deserve a state budget that doesn’t spend beyond its means and leaves room for the private sector to drive growth, said Nick Murray, policy analyst and lead author of the report. “Government cannot be the cart that pulls the horse. This publication provides a path for lawmakers and Governor Mills to budget for sustainable, long-term growth, instead of runaway taxes and spending.”
As a result, lawmakers should implement a number of reforms that reduce government spending and put Maine people in charge of the state’s economic recovery. For example, by aligning spending in the Temporary Assistance for Needy Families program to national averages, Maine Policy estimates the state could save between $40-$60 million. Maine spends more on public assistance than 44 states, more than any state in New England and nearly double the national average.
Substantial savings can also be achieved in MaineCare, Maine’s Medicaid program. Childless, able-bodied adults aged 19-49 comprise more than 70% of the state’s Medicaid expansion population. Maine could save approximately $70 million by limiting expansion to those 50 and older, slowing the main driver of ballooning MaineCare costs over the last biennium.
State lawmakers should also look to implement reforms that send more K-12 education dollars directly to the classroom. There are 34,500 fewer public school students today in Maine than in 2001, a 16.7% decline, yet inflation-adjusted per-pupil spending is 70% higher. There is no lack of funding within Maine’s education system. Throwing money at it has not, and will not, result in greater levels of student achievement.
To increase state revenues, Maine Policy proposes the state move forward with legislation to allow sports betting, which was vetoed by Governor Mills in January 2020. Maine Policy also recommends the state work to close its projected transportation funding shortfall by dedicating all or some of the sales tax revenue from the sale of motor vehicles, and goods related to motor vehicles, to the Highway Fund.
A full list of suggested reforms and corresponding budget savings can be found in the graphic below.
To read the full analysis, click here.
Maine Policy Institute is a nonprofit, nonpartisan organization that conducts detailed and timely research to educate the public, the media, and lawmakers about public policy solutions that advance economic freedom and individual liberty in Maine. Learn more about our work at www.mainepolicy.org