Maine faces a projected $1 billion budget shortfall

(The Center Square) — Maine is facing a nearly $1 billion budget shortfall over the next four years that could force state leaders to raise taxes or cut services, but critics are accusing the Democratic leadership of overspending.

A report released by the Department of Administrative and Financial Services projects that the state will see a general fund shortfall of more than $636 million and a highway fund shortfall of $312 million during the 2026-27 biennium budget approved by the Democratic-controlled state Legislature in the previous session.

Finance Commissioner Kirsten Figueroa said the report is based on “the most recent revenue forecasting against current appropriation and allocation funding requirements in law” and foreshadows a sizable budget deficit.

“The final result – often called the structural gap – is the amount of money by which revenues would have to increase, expenses would have to decrease, existing laws would have to be amended, or some combination thereof would have to be achieved in order for revenues to meet expenditures, as identified by law,” Figueroa wrote in a letter to Mills and lawmakers.

Maine’s constitution requires a balanced budget, which means Gov. Janet Mills and legislative leaders will need to make nearly $1 billion in adjustments by cutting costs or raising new revenues to fully fund the spending package.

Republicans say the dire projections show that the state doesn’t have a revenue shortfall but a spending problem. They criticized Democrats and the Mills administration for a lack of fiscal restraint in creating new programs and expanding services. They point to state financial data showing overall revenues have increased by more than $300 million from the previous biennium budget.

“It’s not a revenue shortfall, it’s excessive spending,” state Rep. John “Jack” Ducharme, R-Madison, said Thursday during a radio interview. “We have a spending problem.”

Ducharme said other issues driving the projected shortfall are the state’s overreliance on one-time spending and federal funding, which “artificially boosted the money that was available to the state for certain programs.” He also blamed the Mills administration for removing fiscal “guardrails” for the state and municipal budgets.

“So now there’s really no guard rails on spending,” he said. “It’s spend what you want, and hopefully will have revenue enough to pay for it. And in the meantime, property taxpayers are getting hammered with bills that they can’t afford to pay.”

Matthew Gagnon, CEO of the conservative Maine Policy Institute, said if the projections prove correct, Maine “will be forced into the position of raising taxes or making drastic cuts” to balance the 2026-27 budget as required by law. He said the cost overruns and shortfalls are a “result of the governor and legislature’s unsustainable spending.”

“This could have been prevented if the governor and lawmakers exercised real fiscal restraint over the last three budget cycles,” Gagnon said. “Instead, they spent nearly every penny available each budget year and used gimmick after gimmick to keep their budgets balanced.”

He said Mills has approved “near universal spending increases across state government without setting goals or standards for this money to achieve meaningful efficiencies within existing programs and departments.”

“Since then, she and lawmakers have only piled on more spending in majority budgets and supplemental budgets without any consideration of Maine taxpayers, or how these bills would be paid in the future,” Gagnon said.