State Fiscal Briefs

January 2021

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Maine’s budget basics

According to the National Association of State Budget Officers (NASBO), Maine’s total expenditures in fiscal year (FY) 2020 were $10.5 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Maine’s combined state and local direct general expenditures were $11.6 billion in FY 2017 (the most recent year census data were available), or $8,703 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Maine’s largest spending areas per capita were public welfare ($2,394) and elementary and secondary education ($1,918). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Maine’s combined state and local general revenues were $12.2 billion in FY 2017, or $9,164 per capita. National per capita general revenues were $9,592. Maine uses all major state and local taxes. After federal transfers, Maine’s largest sources of per capita revenue were property taxes ($2,138) and individual income taxes ($1,150).

Maine’s politics

Governor Janet T. Mills, a Democrat, was elected in 2018 with 50 percent of the vote. The next gubernatorial election is in 2022.

Democrats control both the House of Representatives (80 Democrats to 67 Republicans and 4 independents) and Senate (22 Democrats to 13 Republicans). Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Maine. The entire legislature is up for election in 2022 because both representatives and senators serve two-year terms.

Maine’s budget institutions, rules, and constraints

Maine uses a biennial budget. The legislature is not required to pass a balanced budget, nor is the governor required to sign one, and deficits may be carried over into the following year. However, the state has budget rules that require lawmakers to balance revenues and expenditures. Maine also limits spending growth with a formula based on personal income and population growth. However, the legislature can override the limit with a simple majority vote. The state also limits total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Maine’s recent fiscal debates

  • Maine was the first state to approve Medicaid expansion through a ballot initiative. Voters strongly supported Maine Question 2 after former governor Paul LePage discouraged several efforts to expand Medicaid through legislation. LePage continued opposing expansion even after the ballot initiatives and vetoed five Medicaid expansion bills. The state finally expanded Medicaid when Governor Mills took office in January 2019 and signed Executive Order 1.
  • Although the Tax Cuts and Jobs Act (TCJA) affected all state tax codes, Maine’s connection to federal tax laws meant that the legislation’s enactment created a unique problem. Before the TCJA, Maine was the only state that conformed with the federal personal exemption but not the federal standard deduction (Maine offered its own state-defined deduction). The TCJA eliminated the personal exemption and increased the standard deduction. Thus, if Maine had simply accepted the federal changes, Maine taxpayers would have lost their Maine personal exemption but seen no increase in their Maine standard deduction. That combination means Maine families would have paid hundreds of dollars more in state income tax. Instead, the state passed legislation that created a state-defined personal exemption and a nonrefundable state child tax credit. These changes prevented state tax increases but generally gave bigger tax cuts to families with higher incomes.
  • Maine expanded its refundable earned income tax credit (EITC) in 2018. The legislation increased the state’s credit from 5 percent to 12 percent of the federal EITC and increased the credit to 25 percent for childless workers. The federal EITC provides a far smaller credit to childless workers than to those with children, so states need to create a higher match rate for this group if they want to deliver targeted tax relief. The District of Columbia passed similar legislation in 2014. The Maine legislation also made the state credit available to workers ages 18 to 24 without children, who are not eligible for the federal credit.

Maine’s current budget

Governor Janet Mills announced her proposed FY 2020 and FY 2021 budget in February 2019. The budget prioritizes education spending and specifically funds teacher recruitment and retention and a path toward universal prekindergarten. In her 2019 state of the state address, Governor Mills also highlighted her plans and new funding for expanding MaineCare, the state’s Medicaid program.

The Maine legislature passed its budget in June 2019 and generally followed the governor’s recommendations, including increased spending on education programs and funds for Medicaid expansion. The legislature and governor also enacted property tax relief legislation, which expanded both the state’s homestead deduction and circuit-breaker program.

Governor Mills gave her 2020 state of the state address in January 2020 and released her proposed FY 2020 and FY 2021 supplemental budget in February 2020.

For more on Maine’s budget, see