On Feb. 8, Gov. Janet Mills released the first biennial budget proposal of her term. The plan calls for more than $8 billion in spending over the next two years, an 11 percent increase, far exceeding the rate of inflation or personal income growth.
The governor’s budget lives up to her promise of not raising taxes, for which she should be commended. However overall spending levels within the package are far too high to be sustained into the future, particularly when considering the potential of a recession in the coming years.
In her inaugural address, Mills said “ We know that a recession is possible in the next few years.” It’s great to see the governor is thinking ahead, but the budget she released last month does not reflect this legitimate concern. Instead, excluding the state’s rainy day fund, it leaves only a cushion of $383,355 to protect taxpayers in the event of an economic downturn.
Maine’s Revenue Forecasting Committee warns that we are closer to the next recession than the last, but Mills’ proposal ignores this entirely. The Governor’s Budget Overview included a stress test that concluded a moderate recession would leave a $237 million shortfall by 2021, and a severe recession would leave a $400 million to $525 million shortfall by 2023.
If revenue projections pan out over the biennium, Maine may be able to avoid tax increases, but reducing overall spending would be the safest path forward. What’s troubling about this budget is that the funds we’ve allocated may not be enough to cover the full costs of some programs, and many of the priorities outlined in the proposal work against one another.
The governor’s budget proposes to spend $146.7 million on Medicaid expansion, but evidence from other states shows this may not be enough. A 2018 study by the Foundation for Government Accountability, a group founded on the power of work, illustrates that states expanding Medicaid have seen, on average, 92 percent cost overruns from initial projections, showing Maine may eventually need to allocate an additional $134 million to cover the full cost of the program.
If the current rate of Medicaid enrollment continues, the state is on track to exceed 70,000 enrollees by April 2020. Since Mills signed Executive Order 1 to expand Medicaid, an average of 1,120 newly eligible Mainers have enrolled weekly.
Not only does expansion pose important fiscal questions for Maine, but moral ones too. The bulk of the expansion population consists of childless, able-bodied adults. While the state spends hundreds of millions of dollars to expand services to these individuals, there are 1,598 Mainers with intellectual and developmental disabilities who continue to languish on Section 21 waitlists. Approximately 2,430 total Mainers are waiting for services under Medicaid and state-funded programs. Put simply, this plan prioritizes the wrong population.
Since the release of the budget proposal, Mills and her allies in the Legislature have stressed the importance of reducing property taxes, but the priorities in her budget do just the opposite. The plan calls for increasing revenue sharing to 2.5 percent in 2020 and 3 percent 2021 to provide relief for local property taxpayers, but as MHPC has outlined before, that relief doesn’t occur. Mills’ plan also outlines a mandated minimum teacher salary of $40,000 annually. The state’s long-term plan is to “ phase in local responsibility for teachers’ salaries.” This budget may cover the costs in this biennium, but it won’t be long until this burden is transferred to municipalities.
When pressed about whether her budget would actually reduce the property tax burden, Mills responded, “with more than 400 municipalities and thousands of different ways that they need to spend their money, I’m not sure that’s practical.”
That’s why it’s so important to rein in spending. Consider that, if Maine’s budget increased in line with inflation from 2005 to present, we would be spending just over $7 billion in the upcoming biennium, or roughly $1 billion less than what Mills has proposed.
If the goal is to reduce taxes and make it easier to live in Maine, spend less money; it’s that simple. Mills’ budget moves Maine in the opposite direction.
Adam Crepeau is a policy analyst at Maine Heritage Policy Center. The group’s analysis of the governor’s budget is at: mainepolicy.org/themillsbudget.