CONCLUSION
Currently, the Maine state government is projected to face a nearly $400 million deficit over the next biennium. The good news is that this shortfall is less than half of what was initially projected in August 2020. There are other reasons to be hopeful that the economic costs of the pandemic-related shutdowns will not hinder long-term growth, but Maine has been facing impending, interrelated economic crises for decades: an aging labor force and an unfriendly overall business climate.
The proposals outlined here should be used to construct various pathways for legislators and the governor to achieve a balanced budget and a growing economy, not only for the next two years, but for the next two decades. Maine’s current economic situation is a precarious one, and the systemic issues previously mentioned will not simply fade away. These problems will only get worse the longer Maine lawmakers continue to delay bold action to provide a competitive economic environment, for business owners, workers, and potential entrepreneurs alike.
Instead of taking a long-term approach to crafting the state budget, Governor Mills is merely covering the next two years of costs with no guarantee that the levies will hold for the future. Her budget proposal largely relies on accounting gimmicks to maintain an elevated level of spending, driven in part by previous statutory commitments, but also by the baseline of her first budget. Two years ago, the governor grew real spending by 5% from the previous two years, even though the state’s population grew less than 1% over that time.
Over the last 10 years, real spending on Maine’s General Fund has grown more than 20%, while the population has grown by only 1.66%. Public spending should, at the very least, be tempered by population growth. Maine people deserve the most that their government can give them at the lowest cost, especially in difficult economic times.
Policy Reform & Projected Savings
Today, inflation-adjusted General Fund spending per Maine resident is $3,108, the highest on record. The last time it was closest to today’s height was in 2000, when the U.S. and Maine economies were experiencing the zenith of the 1990s boom. In the last three years of that decade, national GDP grew more than 4% annually. Needless to say, the vast uncertainty of the early 2020s presents a very different economic situation from the windfall of the late 1990s. If Maine lawmakers kept real spending on pace with population since 2010, per capita spending would only be $2,626. Taxpayers would have spent 18% less—$550 million—on the General Fund in the current fiscal year alone.
Legislators should look to the findings in this report to make the hard choices that will put Maine on a path to real prosperity. The time is now to begin reining in ever-expansive government and plan for a future of sustainable growth and prosperity.