Recently, I shared an article on my personal Facebook page that really struck a nerve with people on both sides of the political aisle. My intention was not to spark a heated political debate, but rather to pass on relevant information about our state finances. Nonetheless, it led to an impassioned flurry of comments.
The article was headlined, “Thanks mostly to LePage, Maine has a record $1 billion in the bank.” The story was about the amount of money in Maine’s cash pool and gave the governor much of the credit for the amount the state has.
What followed was a number of posts from people in two different camps: those who support the governor and thanked him for getting the state’s finances in order, and those who believe his fiscal policies have come at the expense of the poor and those who depend on state services.
Rather than weighing in on which side is right, I would like to say that the title of the article is somewhat misleading. The $1 billion refers to all of the revenues the state is receiving at any given point in time. That figure does not reflect expenditures — money going to fund state services.
Some interpreted this as Maine having a $1 billion surplus or “rainy day fund.” That is incorrect. An analogy would be saying you have thousands of dollars in your checking account without mentioning you haven’t yet payed your mortgage or any other bills.
Maine currently has $157.7 million in its budget stabilization fund. According to the Maine Department of Administration and Financial Services, this is enough to operate state government for 12 business days. Leading financial institutions and policy experts recommend that states have enough in reserves to operate for more than a month.
But it is important to point out that this $1 billion cash pool is a record for the State of Maine. It puts the state on firm financial footing as the treasurer does not have to regularly transfer money from other areas of state government to cover expenses and instead the state has cash reserves on hand that can earn interest.
State Treasurer Terry Hayes attributes the impressive sum to two factors: an improving economy and financially prudent measures over the past six years to rein in spending and close the structural gap (the difference between expenditures and projected revenue). I believe that the Republican-led Legislature’s initiatives to control spending are largely responsible for the fiscal policies that have led to the record cash pool.
But despite this good news, lawmakers have a tremendous challenge before us — namely the two-year biennial budget that goes into effect on July 1 of this year. To keep state government functioning, we will have to reach an agreement on our two-year spending plan before that.
Complicating that process is the voters’ passage last November of a new 3 percent surcharge to fund public education. While most of us favor providing schools with more resources, the Maine State Chamber of Commerce and leading business advocates believe this surcharge will have a devastating impact on our economy by raising costs for small businesses, driving away young professionals such as doctors and discouraging investment in Maine.
In the next few months, we will have to strike a balance between funding critical state services while still allowing our economy to grow and flourish.
Much of the discussion will happen in the Legislature’s Appropriations and Financial Services Committee and is open to the public. If you cannot come to Augusta, you can listen to the deliberations of the Appropriations and all committees live on the state government’s website.
— State Sen. David Woodsome represents Maine Senate District 33 which includes communities in York County. He is the chair of the Legislature’s Energy, Utilities and Technology Committee and also serves on the State and Local Government Committee.
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