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AUGUSTA, Maine — Maine cities and towns are facing the prospect of massive budget shortfalls that would force them to substantially cut services while federal relief aimed at making up for revenue lost due to the coronavirus remains up for debate in Washington.
A federal stimulus package passed at the end of March included $1.25 billion for the state of Maine to cover pandemic-related expenses, but that money cannot be used to replace budget shortfalls that occur due to lost revenue during the coronavirus-induced economic shutdown and no Maine cities were large enough to qualify for another federal pool of money for cities.
Maine’s congressional delegation sent a letter to President Donald Trump last week requesting funding for smaller communities that was “flexible to meet state needs.” But Congress has so far stalled on the issue, as some Republicans expressed concern that much of the funding would go to so-called “blue states,” the New York Times reported.
A bill from House Democrats announced on Tuesday included nearly $900 billion in funding, including nearly $1.8 billion for the state government and nearly $1.7 billion for local governments in Maine in 2020, followed by a respective $1.1 billion and $551 million in 2021, according to the office of U.S. Rep. Chellie Pingree of Maine’s 1st District. It’s not yet clear whether the proposal has bipartisan support.
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Absent such an intervention, the state of Maine is facing a revenue shortfall that could grow to $1 billion by mid-2021, according to April projections from Moody’s Analytics. The liberal Maine Center for Economic Policy projected a shortfall of more than $1.2 billion. Much of that will trickle down to cities and towns that are already confronting shortfalls or layoffs.
Portland raised just $3 million in non-property tax revenue in April, according to City Manager Jon Jennings, compared to typical monthly revenue of around $10 million. Assuming current spending and revenue trends, the city expects to end the fiscal year on June 30 with a loss of more than $10 million, Jennings said. It has already furloughed some employees while hoping to avoid layoffs.
“This time is rapidly approaching where we’d have to take more drastic measures,” Jennings said.
The city of Augusta laid off 17 full-time workers and 15 part-time workers at the end of April, citing shortfalls. Workers at the city’s library and community center were among those affected. Bangor has largely avoided layoffs so far, though the city did impose a hiring freeze and the city-owned Cross Insurance Center furloughed employees.
Municipalities have few options when it comes to financing in face of such a sharp budget shortfall, said Steve Gove, executive director of the Maine Municipal Association, a nonprofit representing local governments in the state. While the federal government can run deficits, states and localities generally have to balance their budgets.
“The only way to fill the gap as municipalities look at their budgets is either to reduce services or raise property taxes, neither of which are great alternatives,” Gove said.
While cities and towns are not allowed to collect their own sales taxes in Maine, their budgets have been hit by a pause on car registrations and the elimination of local recreation programs. As state revenue declines, municipalities lose out too.
For the 2021 fiscal year, 3.75 percent of state sales, corporate and personal income tax is supposed to be set aside for municipal revenue sharing, up from 3 percent this year. A projection made by the state treasurer’s office in early March, just before the coronavirus pandemic hit Maine, estimated that total would be $144 million. Now, it is certain to be lower.
Increased funding for local governments has the support of groups such as the Maine Municipal Association, as well as labor groups in the state and nationally, including the American Federation of State, County and Municipal Employees and the Maine AFL-CIO.
If federal aid does not come through, it is difficult to say where cuts would come, said Gove, though libraries, parks and recreation might be among the first programs cut. As the shortfall continues, that puts more pressure on property taxes to cover essential services, such as public safety, waste disposal and road maintenance.
“How bad it could get is an open question,” Gove said.
Watch: The risks associated with reopening rural parts of the state