State sales and income tax revenues continue to outpace forecasts, and the state is already showing a $42 million surplus just two months into the first fiscal year of the two-year budget cycle, Gov. Janet Mills’ administration announced Tuesday.
Tax revenues have come in 11.8 percent higher than forecast since July 1, and the state has taken in $186.5 million more than it did during the same period last year, a 31.7 percent increase. The state’s current $8.77 billion two-year budget is nearly an 11 percent increase over the previous $7.98 billion two-year budget approved in 2019.
“State government finances are in excellent shape, with Maine continuing to record surplus revenues and operate in the black,” state Department of Administration and Financial Services Commissioner Kirsten Figueroa said in a prepared statement. Figueroa credited federal pandemic stimulus funding, a large state savings account and “prudent fiscal management” by Mills for the strong numbers.
“That we avoided the fiscal distress experienced broadly by other states between March and December 2020 is a testament to the wise, bipartisan decisions made by the Governor and Legislature from the onset of this Administration, even prior to the pandemic, to invest appropriately and responsibly and to manage State government in a fiscally sound manner,” Figueroa said. “That we entered the pandemic on such solid footing has made all the difference.”
It is the latest in a string of budget surpluses for the Mills administration, much of it attributed to federal stimulus funding that kept the economy chugging despite numerous pandemic-related challenges. The state has received more than $10 billion in federal aid covering everything from enhanced payments for unemployed residents to federal Payroll Protection Program grants to businesses that helped keep people working during the pandemic.
In April, finance officials announced the state would end the fiscal year $461.9 million ahead of forecasts, a sharp contrast to a June 2020 budget forecast that predicted a shortfall exceeding $1 billion over a three-year period. That dire forecast came just before Congress approved several rounds of federal pandemic aid that provided direct payments to both governments and residents.
Tuesday’s numbers bode well for Mills politically. The state has socked away a record $491 million in the state’s budget contingency, or “rainy day” fund.
Her conservative opponents contend that most of the surplus stems from federal government largesse, but revenue increases from state income and sales taxes are being driven in part by higher wages and greater spending on a range of goods and services.
The administration and Legislature have also boosted the state’s share of public school funding to a record level while restoring state revenue sharing with cities and towns to 5 percent. The current state budget also provides a one-time $300 payment to all state income tax filers who have worked throughout the pandemic and earned less than $75,000 last year, a payment negotiated by minority Republicans into the current budget.
Moody’s Investors Service and S&P Global Ratings, two companies that analyze and issue reports on credit worthiness, have reaffirmed the state’s strong credit ratings and issued stable financial outlooks, Figueroa said.
The state’s good credit rating allows it to borrow money using government-issued bonds at low interest rates, further benefiting the state’s finances. Figueroa said at least 22 states had their bond ratings and outlooks downgraded.
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