November 14, 2019
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Janet Mills offers hopeful budget but raises questions about funding sources

Robert F. Bukaty | AP
Robert F. Bukaty | AP
Gov. Janet Mills delivers her State of the Budget address to the Legislature in February at the State House in Augusta.

Gov. Janet Mills’ $8 billion two-year budget proposal has drawn criticism from both the right and the left, which means it might actually be a good starting point as debates about Maine’s future heat up in an Augusta.

“There will be those who say this budget is government spending run amuck, and there will be those who say we ought to spend more and more. I respectfully disagree,” Mills said in her first address to the Legislature Monday night. Her budget proposal would be a sizeable 11 percent higher than the current budget.

While stopping short of popular Democratic ideas such as fully restoring revenue sharing for municipalities, the proposal would fund Medicaid expansion and increase school funding by $126 million. In her speech, Mills framed the budget around health, opportunity, prosperity and education — which fit nicely into a HOPE acronym.

Those are worthy priorities, but questions about funding realities remain. The fact that Mills’ budget would spend virtually every dollar that the state is projected to bring in through mid-2021 should give the Legislature pause. No amount of hope, ultimately, can insulate the state should our currently strong economy take a turn in the wrong direction.

We don’t have to go too far back in Maine history to see how quickly projected surpluses can turn into structural gaps. Heading in to fiscal year 2000 under then-Gov. Angus King, Maine eyed a more than $320 million surplus. By the 2002-2003 biennium, there was a more than $250 million shortfall projected. After the economic shock that came with the 9/11 attacks, the gap widened to nearly $1 billion for Gov. John Baldacci. That experience should be instructive today.

While the approach of essentially exhausting revenues allows Mills to make good on seemingly divergent campaign promises to invest in some costly policy priorities without raising taxes — at least in the next two years — it could be risky. For many economic forecasters, it’s a question of when the next economic downturn hits, not if. A survey last year from the National Association for Business Economics found that two-thirds of the responding U.S. business economists see a recession coming by the end of 2020.

Mills’ budget rightfully focuses on making Maine healthier and more skilled, and demonstrates a faith in government that has been sorely lacking from Maine’s executive branch for the last eight years. But there’s also a potentially dangerous amount of hopeful economic forecasting here that could leave Maine vulnerable.

Senate Minority Leader Dana Dow, R-Waldoboro, said the figures in Mills’ budget “appear to be rosier than I think they really are” but also noted Republicans “intend to work with both parties together.”

Democrats control both the Maine House of Representatives and Senate, but will still need to negotiate with Republicans on the budget.

Last weekend, Senate President Troy Jackson pledged to engage the other side of the aisle in the budget process.

“There will be no majority budget,” Jackson, D-Allagash, said Saturday morning during a Bangor Region Chamber of Commerce roundtable discussion. “We will do a two-thirds budget, and work together to craft that. And that’s the way it should be.”

Monday night, Mills said she heard four main messages on the campaign trail: People want better health care, better schools, better jobs and economic opportunity, and they don’t want higher taxes.

Now that she’s in charge, Mills will have a hard time satisfying those first three wants over the long term — at least through the means she and other Democrats are proposing — without disappointing people on the fourth.

Mills’ proposal may thread a political needle, but calls from her left to roll back the LePage-era tax cuts are a more intellectually honest way of achieving her policy goals. The so-called prosperity budget from the liberal Maine Center for Economic Policy, for example, may be politically perilous, but would at least match its lofty policy aims with a more definitive funding source through a $518 million tax increase, essentially a rollback of tax cuts passed by lawmakers in 2011.

It’s hard to see the path laid out in the Mills budget not eventually leading to tax increases. Counting on existing revenue sources doesn’t seem to be a reliable, sustainable way to absorb hundreds of millions of dollars in spending increases over the next two years, and beyond.

At least one thing is clear: it’s early in the process. The Mills budget in many ways represents a refreshing reset of priorities. Questions about the funding sources and revenue projections, however, should be front and center as the Legislature considered this initial proposal.

 



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