Governor Mills Unveils Part Two Budget Proposal With Historic Investment in Maine Schools, Achieving 55 Percent of Education Costs For First Time in Maine History

Governor Mills Unveils Part Two Budget Proposal With Historic Investment in Maine Schools, Achieving 55 Percent of Education Costs For First Time in Maine History

Governor’s budget proposal also invests in a host of bipartisan priorities including health care, tax relief, revenue sharing, savings, and more

Governor Janet Mills today unveiled her Administration’s Part 2 budget for the Fiscal Year (FY) 2022-2023 biennium, a proposal that makes a historic investment in Maine public schools and meets the State’s obligation to pay 55 percent of the cost of K-12 education for the first time in Maine’s history.

If approved by the Legislature, the achievement would come more than fifteen years after Maine voters first passed a referendum directing State government to pay 55 percent of local school costs. The Governor’s proposal would not only finally meet the State’s obligation for the first time ever, but would also increase desperately-needed resources for cash-strapped schools and hold down local property taxes.

In her budget proposal, Governor Mills also proposes funding a host of bipartisan priorities, including initiatives to improve the health of Maine people; tax relief for low- and middle-income Maine people; enhanced revenue sharing for municipalities; PFAS remediation; and infrastructure upgrades – all while adding money to the Budget Stabilization or “Rainy Day” Fund. The proposal, which is balanced and does not raise taxes, also leaves approximately $21 million in allocated funds for the “appropriations table”.

“Because of our prudent fiscal management during the pandemic and Federal support, we have a healthy revenue forecast for this biennium. As a result, we can not only fully fund education for the first time in our history, but we can give money back to the taxpayers through revenue sharing, tax fairness credits for property taxpayers, and income tax relief for low-income and middle-class families,” said Governor Janet Mills. “This budget proposal focuses on improving the lives and livelihoods of Maine people and on strengthening our state for years to come.”

“Immediately upon taking office, Governor Mills made Maine's public education system a top priority, investing in a minimum teacher salary of $40,000, increasing the State's contribution to offset local education costs, and allocating millions of dollars to local schools for pandemic response. The Mills Administration has championed equity and excellence for all students while elevating professional respect and opportunities for educators and school leaders,” said Pender Makin, Commissioner for the Department of Education. “Today, at a time when the value of local public education has never been more clear, we move to a bold and unprecedented commitment of funding as Governor Mills aims to become the first and only leader to achieve Maine's long-sought goal of 55 percent contribution to the total cost of pre-K through grade 12 public education. For nearly two decades, the incremental funding targets shifted, extending the timeline further into the future with each biennium, leaving a disproportionate cost for local taxpayers. Today, with this historic announcement, Governor Mills fulfills a long overdue promise to Maine students and schools - and to the communities they serve.”

“Today’s proposal builds on the current services budget enacted earlier this year and complements the initiatives already outlined in the Governor’s Maine Jobs & Recovery Plan and bond proposal,” said Kirsten Figueroa, Commissioner for the Department of Administrative & Financial Services. “This Administration continues to prioritize the wellbeing of Maine families, communities, and businesses while supporting and rebuilding the state’s education, public health, and physical infrastructure, strategically utilizing Federal funds, and jumpstarting Maine’s recovery, especially for those hardest hit by the pandemic or overburdened by property taxes. Our disciplined approach continues with this proposal, which utilizes rising revenues while also leaving additional funding on the table for the unknown.”

“On her first day in office, Governor Mills expanded Medicaid and directed the development of a plan to make MaineCare stronger and sustainable. Today’s budget allows us to act on that plan, launching payment rate reforms, making short-term investments to reduce long-term costs, and adding to the Medicaid Stabilization Fund to continue implementation in the coming years,” said Jeanne Lambrew, Commissioner for the Department of Health and Human Services.

Last month, Maine’s nonpartisan Revenue Forecasting Committee (RFC) upgraded the State’s General Fund revenue forecast by approximately $939.9 million through FY 2022-2023, surpassing the amount of revenue that had been forecasted prior to the onset of the pandemic.

This State’s solid financial standing is the result of the responsible fiscal moves Governor Mills and the Legislature made last year, along with prudent management of Departmental spending throughout the pandemic, and significant Federal support for Maine’s economy and for Maine people. As a result, Governor Mills was able to maintain critical services for Maine people throughout the pandemic.

Today’s proposal is presented as a “change package” that builds on the Governor’s original proposal for the FY 2022-2023 biennium. If approved, it would become the supplemental budget for FY 2022-2023. Taken in combination with the current services budget enacted earlier this year, the Governor’s proposals for FY 2022-2023 would result in a $8.77 billion budget for the biennium, which is $390 million lower than the RFC projects in General Fund revenue for FY 2024-2025.

The “Part 2” budget complements the Governor’s Maine Jobs & Recovery Plan, her Administration’s proposal for the use of American Rescue Plan Act funding, and her recently released bond proposal, which, together, chart a path for robust and widespread economic recovery and growth.

Highlights of Governor Mills’ Part 2 Budget include:

Investing in Maine Kids and Maine Schools:

• $187 million to meet the State’s obligation to pay 55 percent of local education costs for the first time in Maine’s history.
• $47 million to support Maine’s public higher education institutions, including the University of Maine System, the Maine Community College System, and Maine Maritime Academy, including funds to renovate Maine Maritime Academy’s Curtis Hall.
• $20 million to increase the Maine State Grant Program’s maximum award from $1,000 to $2,500. The Maine State Grant Program provides need-based grants to Maine undergraduate students to help with the cost of higher education.
• $50 million to rejuvenate the School Revolving Renovation Fund, which provides no-interest loans for school repairs across the state. This would be Governor Mills’ second investment in the fund, extending her commitment to upgrading Maine’s school facilities and providing further property tax relief for Maine families.

Improving the Health of Maine People:

• $151 million to further reform MaineCare to advance the health of Maine people and support the economic recovery of the health sector, including:
  • increasing provider payment rates for dozens of services -- representing the first rate improvements resulting from a comprehensive evaluation initiated by the Maine Department of Health and Human Services to create a streamlined and coherent rate system that supports access to high-quality services;
  • expanding access to preventive and routine dental care for adults;
  • investing in services like care coordination for prevention of diabetes and other chronic conditions to reduce long-run costs;
  • providing $15.4 million in short-term supplemental payments to hospitals, nursing, and residential care facilities facing lower occupancy due to the pandemic and to combat staffing shortages by funding increased pay, sign-on bonuses, recruitment, and agency staffing; and
  • depositing $90 million of funds available due to temporarily increased Federal funding tied to public health emergency into the Medicaid Stabilization Fund to ensure sustainability of services and full implementation of reforms.
• $1.3 million to exempt menstrual health products from sales tax.
• Approximately $32 million to replace lost revenue from ending the sale of flavored tobacco products, including menthol cigarettes, cigars, and electronic cigarettes to curb tobacco use among Maine children.
• $1 million to support the Permanent Commission on the Status of Racial, Indigenous and Maine Tribal Populations’ work to promote, implement, and coordinate programs that create and improve opportunities and incorporate the goal of eliminating disparities for historically disadvantaged racial, indigenous and tribal populations in Maine. Governor Mills previously dedicated $50,000 from the Governor’s Contingent Account to support the work of the Permanent Commission.

Providing Economic Relief for Low- and Middle-Income Maine People:

• $22.3 million to provide relief for Maine elderly and low-income individuals, middle class families, and renters overburdened by rising property taxes through Maine’s refundable Property Tax Fairness Credit, including:
  • increasing the maximum benefit for non-elderly filers from $750 to $1,000 and for elderly filers from $1,200 to $1,500 for tax filing year 2021, and
  • lowering the required tax-to-income threshold beginning in the 2022 tax filing year, which will expand eligibility and increase the benefit.
• $37.7 million in targeted support to jumpstart economic opportunity for low- and middle-income Mainers, minorities, women, front-line workers, and other groups disproportionately affected by the impacts of the pandemic, including:
  • conforming at the State level to all Federal tax code changes in the American Rescue Plan Act, including favorable tax treatment for restaurant revitalization grants, expansion of the Earned Income Tax Credit (EITC) to taxpayers without a qualifying child, and improving the Child & Dependent Care Credit and employer-provided dependent care benefits, and
  • increasing, in Maine, the EITC benefit levels for the 2021 tax filing year.

Strengthening Maine’s Infrastructure & Partnerships with Municipalities:

• Approximately $80.2 million more to improve revenue sharing to 4.5 percent in FY 2022 and 5 percent in FY 2023, fulfilling the State’s obligation to Maine municipalities and mitigating property taxes increases.
• $40 million to restore farmers’ livelihoods, local property values, and the public’s trust in the safety of their drinking water through remediation of per- and polyfluoroalkyl substances (PFAS), including: $15 million to help farmers impacted by PFAS, $15 million to provide safe drinking water, $5 million for environmental testing, and $5 million for managing PFAS-contaminated waste.
• $5 million to leverage local and Federal funds to recapitalize the municipal culvert program at stream crossings, improving fish and wildlife habitats and increasing infrastructure resilience and public safety.
• $5.5 million for climate-focused grants, technical assistance, and incentive programs to support communities developing energy and climate resilience plans.
• $6.8 million to leverage an estimated $7.6 million in Federal funds for National Guard facility repairs and renovations that will result in better training, increased unit readiness, safer working environments for Soldiers, and improved morale.
• $87 million into an account for the stewardship of State-owned buildings to complete long-overdue and badly needed repairs to building exteriors, windows, insulation, foundations, HVAC, roof, electrical, plumbing, and interiors.
• $18 million transfer from the General Fund to the Highway Fund to mitigate one-time revenue loss due to the impacts of the pandemic and to maintain transportation infrastructure.

In addition, the proposal deposits $52 million to the Budget Stabilization or so-called “Rainy Day” Fund to hedge against future economic downturns. If approved, this budget would grow the Budget Stabilization Fund to more than $319.9 million, a record amount of savings, and an increase of more than $111 million under Governor Mills’ tenure.

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 bond rating and for rating Maine’s debt as stable during the pandemic, even while downgrading ratings of other states.

The Governor will also submit to the Legislature a proposal that balances the Highway Fund budget, which, when combined with anticipated Federal funds and bonding, maintains essential levels of service.