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“Inescapable shortfall” Maine’s budget projected among worst due to COVID-19, stay home order

Governor Janet Mills addresses the people of Maine on the COVID-19 pandemic via video.

AUGUSTA, ME – Maine’s two-year budget shortfalls are growing worse by the day and a Moody’s Analytics stress test has ranked Maine among the worst states in the nation for withstanding the revenue shortfall the state is facing. One group, Maine People Before Politics, is calling on Governor Janet Mills to take immediate action to mitigate the damage.

According to MPBP, Governor Mills has not taken any action to preserve existing revenue and prepare for the revenue shortfall in the future, instead continuing to spend at normal budget levels.

“Given the speed and severity of the recession we are now in, and the devastating enormity of the potential revenue loss, our leaders in Augusta must demonstrate to the Maine people that they are being immediately proactive and not simply reactive. As of yet there have been no publicly announced hiring freezes for non-COVID-essential state positions or a curtailment order by Governor Mills to preserve as much revenue on hand as possible,” said Julie Rabinowitz, director of policy and communication for Maine People Before Politics.

According to Moody’s, a baseline projection shows Maine would see about $765 million less in revenue with almost $110 million in increased Medicaid expenses, for a “fiscal shock” of about $865 million.

Under a more severe scenario Moody’s projected, the fiscal shock could see a loss of almost $1 billion in revenue and fiscal shock of more than $1.1 billion.

Maine’s budget stabilization fund, also known as the rainy day fund, is ill prepared to fill the gap. According to the analysis from Moody’s, Maine will be one of the states facing “inescapable shortfalls” that our reserve funds won’t even come close to closing.

Under a severe scenario projected by Moody’s, Maine’s rainy day fund balance can only cover 8.1% of our projected shortfall, leaving us facing a budget shortfall of about 18%.

“Going forward the state will see huge losses in income, corporate, and sales taxes as well as hits to the Highway Fund because so many fewer people are driving. Mainers need to know how the state plans on addressing these massive shortfalls in the near and long term,” says Rabinowitz, calling for transparency on the state’s plan going forward.

With thousands of Maine small businesses on the verge of closing their doors for good and no action from the Mills administration to either curtail spending or signal a reopening of the state economy, the picture is worsening by the day.

Governor Paul LePage has also weighed in on the current state of the budget after leaving Maine with record cash pools in early 2019.

“I left Maine with an enhanced rainy day savings fund, strong job growth, and a reasonable budget. However, Janet Mills chose to take Maine down a very different path. She dramatically increased spending and expanded welfare, increasing Maine’s budget by nearly $1 billion. Now Moody’s points out that states are facing difficulty not only from declines in revenue but also from increased welfare Medicaid spending,” said LePage in a Facebook post.

“Spending-thirsty liberal politicians pushed me again and again to spend more of the taxpayers money and grow government. I said no. They got their way with Janet Mills. The chickens may be coming home to roost,” concluded LePage.

Maine People Before Politics is calling for transparency from Governor Janet Mills’ team so lawmakers can begin working on solutions while avoiding massive tax increases while families are suffering the impact of the pandemic.

“The Mills Administration must brief the Legislature in public about the reality of our fiscal situation and tell Mainers how they plan to use the rainy day fund as a stopgap as well as cut spending or raise revenue going forward. Thousands of Maine families are in financial difficulty. They need reassurance that the Mills Administration will not burden them further with tax increases necessitated by a lack of response,” said Julie Rabinowitz.

According to the projections from Moody’s, Maine’s state budget woes will place Maine among the ten to twelve states worst positioned to weather the financial storm caused by the pandemic.

The projections bring context to calls for Mills to reopen Maine’s economy, highlighting the pressures she faces with a worsening budget condition likely to cause severe cuts in funding for local governments, welfare, education and transportation, or the wholesale elimination of a number of other government programs to fill even greater budget shortfalls.

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