A new two-year state budget proposal Gov. Janet Mills will deliver to the Legislature keeps state spending in check without raising taxes or cutting programs and services Maine citizens depend on most, a top official in Mills’ Cabinet said Thursday.
Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services, said state government finances were solidly in the black going into the COVID-19 pandemic last March. That positioned the state well for revenue losses triggered by restrictions on business ordered by Mills to slow the spread of the virus.
The revenue losses were not as severe as expected, and early financial support from Congress for state government and individuals further softened the impact of the virus on state government finances, Figueroa said.
“We will be able to cover the COVID-19 related revenue shortfall for this fiscal year and cover the projected revenue shortfall for the upcoming biennium while maintaining critical services and access to those critical services that Mainers need now more than ever,” she said.
The state’s current two-year, $8 billion budget will expire at the end of the fiscal year on June 30. The Legislature must approve a new budget before then to avoid a state government shutdown.
Figueroa would not reveal details of the new spending plan, which Mills will present Friday at noon. The Legislature’s budget-writing Appropriations and Financial Affairs Committee has been meeting almost monthly since March and has been monitoring the financial ups and downs caused by COVID-19.
Mills, a Democrat, has taken a series of actions, including a budget curtailment order in August asking all state agencies to essentially reduce spending by 10 percent. A state government hiring freeze for all but essential state workers was also implemented at the onset of the pandemic and travel restrictions and energy cost-savings resulting from 80 percent of the state government workers working from home have also helped the state’s financial picture. The curtailment saved the state an estimated $222 million.
The federal government has also played a critical role in keeping state finances stable, with a total infusion of $7.6 billion in COVID-19 relief funds that allowed the state to respond to the virus without draining its budget. About $4.5 billion of that relief went directly to Maine people or businesses in the form of economic stimulus checks, enhanced unemployment benefits or from the Paycheck Protection Program, which provided forgivable loans to businesses to keep workers paid.
In March, Mills and the Legislature worked quickly to pass a supplemental state budget that reduced state spending while setting aside $184 million in the state’s budget stabilization fund. That money has yet to be tapped, and the next budget proposal from Mills also leaves this so-called “rainy day” fund intact, Figueroa noted.
Initial revenue forecasts showed state government could see a revenue shortfall of more than $1.5 billion over the next three fiscal years, including the current fiscal year. But those predictions have proved to be high by about 50 percent. The latest forecast suggests revenue losses on the order of $255 million for the current fiscal year – about half the original projection of $528 million. Revenue losses for the following two fiscal years, 2022 and 2023, were also downgraded sharply.
“Though still below pre-pandemic figures, the COVID-related shortfall we were initially expected to experience in just one fiscal year has now, in effect, been spread over three years, indicating that our fiscal response is working and offering us modest breathing room,” said Kelsey Goldsmith, a spokeswoman for Figueroa.
The state’s finances may also benefit from any additional federal relief that could be approved by the new Congress and President-elect Joe Biden. That would be another factor to consider as the governor and the Legislature move forward with building the next two-year budget, Figueroa said.
“It’s really been a steady-as-she-goes approach,” Figueroa said, using a sailing and shipping analogy. “Working around the clock to keep the boat stable amid stormy seas, with no sudden turns or large swells.”
Democrats hold majorities in both the House and the Senate and could push for a majority budget without the support or input of members of the Republican minority, but Figueroa said that would not be the favored approach of the Mills administration.
She said she believed the proposal Mills would detail on Friday would a budget “worthy of bipartisan support.”
Tom Desjardin, a spokesman for Senate Minority Leader Jeffrey Timberlake, R-Turner, said Republican leaders would not comment on the budget proposal until they had a chance to review it in detail.
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