AUGUSTA, Maine — Fraught Maine budget negotiations are set to begin under an austerity mindset in 2021 as many top Democrats hope for more federal aid but place spending cuts ahead of tax increases and Republicans look for major spending reductions.
The coronavirus-induced economic slowdown will dominate Maine politics next year as the state faces a projected $1.4 billion revenue shortfall over three budget years. Lawmakers will immediately have to sign off on $130 million in proposed curtailments by Gov. Janet Mills to partially plug a $528 million shortfall in the budget year ending next June.
Maine and the U.S. went from good times to a recession overnight when the pandemic hit in March. Budget negotiations are looking a bit like they did in 2019, when the Democratic governor took office behind a pledge to not raise taxes that hemmed in progressives who would have rolled back tax cuts championed by former Gov. Paul LePage — at least for higher earners.
Lawmakers are largely looking to cuts, federal aid and reserves. Eleven of 29 Democrats running for Maine Senate who responded to a Bangor Daily News survey said they opposed tax increases or would consider cuts to the next two-year budget, including some who will hold keys to negotiations. By contrast, 19 of 29 Republican candidates for the upper chamber said the same thing. Just four Senate candidates said they would consider tax increases on anyone.
Some may be holding their cards close as the administration of President Donald Trump continues discussing a potential stimulus package with congressional Democrats. Though state aid has been discussed as a part of another package on top of the $1.4 billion given to Maine under a March stimulus, no future deal looks imminent before the Nov. 3 election.
Mills has avoided dipping into the rainy day fund so far, but that will get harder as the economic ramifications of the virus continue and additional federal aid from Congress. State department heads are expected to turn budget proposals in next week in preparation for a second two-year budget proposal that will define the second half of the governor’s first term.
The makeup of the Maine Senate will be a crucial factor in how those conversations will play out. It is the chamber that appears to be most in play, with Democrats looking to hold onto their majority next year by focusing on several contested races in perennially competitive districts.
Senate President Troy Jackson, D-Allagash, did not respond to a request for comment on Monday but answered the BDN survey by saying federal aid, the rainy day fund and cuts should be prioritized in that order. Sen. Cathy Breen, D-Falmouth, the co-chair of the budget committee, said reserves should be used “before we consider revenue increases.”
Progressive groups including the Maine Center for Economic Policy are renewing an advocacy push to raise taxes on high earners in the state as a way to avoid cuts. Melanie Sachs, a Democrat running for the House in Freeport, said “everything should be on the table in these times,” though there is aversion to that idea in rural areas.
“The folks in the middle class can’t keep getting pinched for paying more than their fair share,” said Gabriel Perkins, a Democrat from Bethel facing a difficult race against Sen. Lisa Keim, R-Dixfield.
Republicans were critical of Mills’ $8 billion budget proposal in early 2019 and have suggested a baseline return to spending to mitigate the shortfall. Senate Minority Leader Dana Dow, R-Waldoboro, said there is time for businesses to recover as more state restrictions are lifted, so cuts may not be as steep as projected but are still likely to be large.
“You can’t get blood from a turnip,” he said, pointing to education and health care as likely spots for cuts because those areas make up the majority of the budget.
One Republican outlier was Bradley Moulton of Cape Neddick, a former state representative challenging Mark Lawrence, D-York, for the coastal Senate District 35. He suggested restructuring the income tax system to make it more progressive to offset the burden lower income taxpayers face from broad-based taxes like the sales tax.
He said his stance might make him an outlier in his party, but he said both parties “need to be honest” about the economic crisis the state is facing and fix it at the state level.
“We can’t wait for Uncle Sam to come around and fix things,” he said.