AUGUSTA, Maine — The massive spending bill on track to pass Congress this week is likely to bring more than $6 billion in new aid to Maine that will prompt years of conversation on how to use a $1.6 billion portion to buoy budgets at the state and local levels.
It is already affecting the conversation in Augusta, where lawmakers will meet on Wednesday to vote on a short-term budget that could fail after Democrats and Republicans deadlocked last week. A major impasse is over Gov. Janet Mills’ power to dole out state aid under the federal relief bill championed by President Joe Biden and his fellow Democrats.
Maine will get $1 billion in state aid, plus $647 million for local governments. It’s less than a third of the more than $6 billion the liberal Maine Center for Economic Policy estimates will come here under the American Rescue Plan, including $1.7 billion in stimulus checks, $500 million in tax breaks aimed at low-income families and more in unemployment and other programs.
The sum is staggering, far exceeding projected revenue shortfalls on the state and municipal levels. It also comes with the worst of the pandemic likely behind the country. The Democratic governor announced an economic reopening plan on Friday in preparation for a busy tourism season with 1 in 5 Mainers having received a first dose of a COVID-19 vaccine.
Conversation around how to spend the money is likely to come over months and years with some ticketed for the private sector and ongoing losses expected in cities and towns. Maine gave out $1.25 billion in federal money last year, but its next plan is likely to be more long term. A plan from an economic recovery panel convened by Mills last year could be a guide.
“Now, the effort needs to be to help us get to our next chapter in economic growth,” said Dana Connors, CEO of the Maine State Chamber of Commerce.
The share of aid headed to Maine far exceeds its projected three-year budget shortfall of $650 million. The portion for cities and towns would more than quadruple the $146 million in 2020 losses pegged in a Maine Municipal Association survey conducted last summer, though Kate Dufour, a lobbyist for the association, cautioned those estimates were conservative.
The new aid came on top of the $3.5 trillion passed by Congress last year and on the heels of estimates showing the pandemic did not hit states as hard as initially expected. A recent JP Morgan study put Maine among 21 states that saw revenue grow between 2019 and 2020. Generous federal unemployment benefits bailed out states like Maine that tax them.
U.S. Sen. Susan Collins of Maine and other Republicans have assailed the measure for its spending under those circumstances, noting hundreds of billions in unspent stimulus money and a formula change relative to the $2.2 trillion CARES Act giving more to states with high unemployment. Maine loses $155 million under that, according to House Republicans.
But states and localities will be able to cover virus-related expenses through 2024 with the aid, which cannot be used to fund tax breaks or pension obligations under the version of the bill passed in the Senate last weekend. Mills’ Economic Recovery Committee called for $1.1 billion in aid last year, arguing that the aid received under the initial bill was inadequate.
The Maine governor was slower in giving out money under the CARES Act than neighboring governors were, but she finished awarding it in December with $294 million going to replenish a sapped unemployment fund and another $240 million in grants to Maine businesses.
Her recovery panel called for far more on a long-term basis, including $300 million for pre-K, but the governor has given few clues on how she will use the next round. A budget department spokesperson said Monday the state will “protect public health amid the ongoing pandemic, accelerate our economic recovery, and support Maine people and Maine businesses.”
The new aid will feature prominently in state politics this week, as the Legislature convenes at the Augusta Civic Center to vote on a supplemental budget that will enshrine spending cuts and mirror federal tax breaks on Paycheck Protection Program loans under a bipartisan deal.
It may fail to win necessary two-thirds votes in both chambers, however, as minority Republicans hold out in a bid to extend other business tax breaks and pass a provision that would mandate two-thirds approval on any plan to spend federal aid. Lawmakers will also vote on a Republican-backed measure to end Mills’ emergency power to manage the pandemic that is destined to fail in the Democratic-led Legislature.
They will meet at the Augusta Civic Center, a city-owned building subject to hundreds of thousands of dollars in losses and some of the city’s three-dozen layoffs early in the pandemic. Dufour, the municipal lobbyist, said it was too early to know exactly how the local aid in the stimulus bill will plug gaps but that it will take time for local governments to ramp back up.
“Municipal officials are not worried about this year. This year is fine,” she said. “But two years from now, what happens when we have to start thinking about bringing people back?”
Correction: An earlier version of this report misstated the estimated amount of aid local governments in Maine are expected to get from the latest federal stimulus bill.