Governor Announces Proposal to Increase Budget Stabilization Fund
February 22, 2016
Balance of fund would increase from $111.1 to $183.8 million.
For Immediate Release: Monday, February 22, 2016
Contact: David Heidrich, Director of Communications
AUGUSTA – Today, Governor Paul R. LePage announced his intention to introduce legislation dedicating an additional $72.7 million to the State of Maine’s Budget Stabilization Fund (BSF).
The announcement follows news from earlier today that the Maine Revenue Forecasting Committee (RFC) will be forecasting significant revenue growth in its upcoming spring forecast. The RFC publicly discussed anticipating a $72.7 million General Fund revenue increase from now through the end of the FY16/17 biennium. The formal forecast is due to Governor LePage and the Legislature no later than March 1, 2016.
“It is vital for the State of Maine to continue growing the balance of our Budget Stabilization Fund,” said Governor LePage. “The Maine Legislature chooses to spend 99 percent of all General Fund revenue received by the State. Just one penny of every dollar received by the State of Maine goes into savings. It’s not fiscally responsible.”
The State of Maine spends more than $3 billion annually and the current fund balance of $111.1 million accounts for just 3.3 percent of general fund revenues received by the State. The Federal Reserve Bank of Boston (PDF) recommends Maine have between 10 percent and 15 percent in reserves. The State of Maine could operate for just over a week with the current balance of the budget stabilization fund.
The governor’s proposal will utilize two transfers totaling $72.7 million to bolster the balance of the fund. The funding comes from a $67.3 million revenue projection increase through the end of the current fiscal year and a $5.4 million projected revenue increase to end fiscal year 2017. The State Controller is required to complete the transfers to the fund by June 30, 2016 and June 30, 2017, respectively.
“The Maine Legislature has shown that they cannot be trusted to exercise fiscal restraint,” said Governor LePage. “In June, they passed a budget that increased spending by more than $300 million, and now, as part of our administration’s tax conformity proposal, a radical group of socialist Democrats has recklessly proposed raiding the fund of more than $20 million. The forecast from the Revenue Forecasting Committee represents an opportunity for Maine to significantly increase the balance of the stabilization fund and restore some semblance of fiscal responsibility to state operations.”
If successful, the proposal would grow the balance of the fund from $111.1 to more than $178 million by the end of the current fiscal year. By the end of the 2017, the Budget Stabilization Fund would exceed $183 million. Neither of these projected totals includes additional contributions that may be made as a result of the statutorily required fiscal year-end cascade.
“Bond rating agencies, such as Moody’s and Standard & Poor’s, have warned the State of Maine for years of the consequences should we fail to maintain or increase the balance of our Budget Stabilization Fund,” said Governor LePage. “Our existing balance is insufficient. All too often we wait until the last day of the fiscal year to determine what money the state will put into savings. This is an irresponsible way to run a business and an irresponsible to run a government. It is time for the Maine Legislature to show that increasing the balance of the Budget Stabilization Fund is a priority.”
The bill is as follows:
An Act To Provide Funding in the Maine Budget Stabilization Fund
Emergency preamble. Whereas, acts and resolves of the Legislature do not become effective until 90 days after adjournment unless enacted as emergencies; and
Whereas, the current reserve balance is not sufficient for a state that spends more than three billion annually and the 127th 1st Maine Legislature enacted Governor LePage’s proposal to strengthen the position of the fund, increasing the cap on the Maine Budget Stabilization Fund from 12% to 18%. The additional revenues in this Act that will be re-projected in the March 1, 2016 revenue forecast will be a one-time increase in Fiscal Year 2015-16 only ; and
Whereas, the 90-day period may not terminate until after the beginning of the next fiscal year; and
Whereas, certain obligations and expenses incident to the operation of state departments and institutions will become due and payable immediately in order to achieve savings authorized in this Act; and
Whereas, in the judgment of the Legislature, these facts create an emergency within the meaning of the Constitution of Maine and require the following legislation as immediately necessary for the preservation of the public peace, health and safety; now, therefore,
Be it enacted by the People of the State of Maine as follows:
Sec. 1. Transfer to Maine Budget Stabilization Fund. Transfer to Maine Budget Stabilization Fund. The State Controller shall transfer $67,292,995 to the Maine Budget Stabilization Fund established in the Maine Revised Statutes, Title 5, section 1532 from the unappropriated surplus of the General Fund no later than June 30, 2016.
Sec. 2. Transfer to Maine Budget Stabilization Fund. The State Controller shall transfer $5,389,377 to the Maine Budget Stabilization Fund established in the Maine Revised Statutes, Title 5, section 1532 from the unappropriated surplus of the General Fund no later than June 30, 2017.
Emergency clause. In view of the emergency cited in the preamble, this legislation takes effect when approved.