Prudent fiscal management, Federal pandemic relief, and rising prices are expected to increase receipts to the State’s General Fund even in the face of flat tax rates
Following its meeting today, Maine’s nonpartisan Revenue Forecasting Committee (RFC) is expected to upgrade the State’s General Fund revenue forecast by approximately $822 million for Fiscal Years 2022 and 2023, representing approximately a 9.7 percent increase over previous projections for the current fiscal year and next.
“Throughout my time in office, my Administration has responsibly managed Maine’s finances and budget, and this projected increase in revenues is a testament to that success as well as the support of Federal pandemic relief. In fact, under my tenure, the Rainy Day Fund has doubled to a record high and Maine’s GDP growth has not only fully recovered from the pandemic, but has surpassed pre-pandemic levels,” said Governor Janet Mills. “But that doesn’t mean we are without challenges. The increased costs of electricity, home heating fuels, gas at the pump, and other necessities are putting a real strain on the budgets of Maine people, which is even more difficult during the harsh winter months. I would like to examine ways we can use this additional revenue to provide direct financial relief to folks hard hit by these increases to help them through these difficult times.”
“Maine’s economic recovery continues buoyed in large part by this Administration’s prudent budget management and more than $15 billion in unprecedented Federal pandemic relief to Maine people, communities, and businesses,” said Kirsten Figueroa, Commissioner for the Department of Administrative and Financial Services. “We remain committed to utilizing resources in a fiscally responsible manner and to ensure the stability of State finances over the long-term.”
The RFC’s projected increase for this fiscal year and next is based on the economic forecast of the independent Consensus Economic Forecasting Commission (CEFC), which boosted its economic outlook for Maine as a result of prolonged low interest rates, continued Federal stimulus, and a number of other economic indicators, including an expected increase in the Consumer Price Index, high consumer activity, and improved corporate earnings.
With these new projections, the Mills Administration will craft a supplemental budget proposal in the coming weeks for the Legislature’s consideration.
Through the biennial and supplemental budgets for Fiscal Years 2022 and 2023 already in place, the Legislature approved and Governor Mills enacted a number of measures specifically designed to provide relief for lower- and middle-income households with an eye toward tamping down local property tax burdens, including:
- Directing relief for 83,000 low-income and middle-income homeowners and renters hard hit by the pandemic through the Property Tax Fairness Credit;
- Improving funding for public education,keeping a promise from the Governor to meet the State’s obligation to pay 55 percent of the cost of K-12 education for the first time in Maine’s history;
- Nearly doubling revenue sharing to Maine’s towns and cities;
- Making $285 payments to Maine people who worked during the early days of the pandemic;
- Preserving the Earned Income Tax Credit, which provides tax relief to middle and low-income Maine families with children;
- Extending the tax credit for Maine small businesses to help them recoup costs associated with providing paid family medical leave, thereby helping them keep people employed amid the pandemic; and
- Expanding the Educators Expense Deduction for Maine teachers, allowing them to deduct unreimbursed expenses for classroom materials.
Further, the Mills Administration has more than doubled the State’s Budget Stabilization, or so-called “Rainy Day” Fund, bringing it to an historic high of $491.9 million.
Additionally, Moody’s and Standard & Poor’s credit rating agencies have cited Maine’s governance practices and its reserves in the Budget Stabilization Fund as grounds for reaffirming Maine’s Aa2 and AA bond ratings, respectively, and for rating Maine’s debt as stable during the pandemic, even while downgrading ratings of other states.