Economists are once again increasing the state’s tax revenue projections, saying they expect Maine to take in an additional $108 million this year and next largely because of higher-than-anticipated corporate income tax payments.

The new forecast, which is on top of a nearly $265 million surplus announced in November, is a familiar refrain since the pandemic, which brought an influx of federal funding to support workers, businesses, and state and local governments that buoyed state revenues. The recurring surpluses also are propelled by consumer spending driving up sales tax revenues and strong employment increasing income tax collections.

Because Maine has a constitutional requirement to balance its budget, the new revenue projection means Gov. Janet Mills must submit a change package to her pending budget proposal to allocate all of the more than $370 million in surplus. It’s unclear when that package will be released.

Mills’ budget office sought to tamp down any impulses to use the new surplus for additional ongoing spending or for tax cuts, saying the money should effectively be saved for leaner years ahead. The administration framed the latest projected surplus as a one-time event, even though surpluses have been common in recent years.

“These savings are important because, while revenues will remain largely flat, we know the costs of programs will increase in the coming years,” Kirsten Figueroa, the commissioner of the Department of Administrative and Financial Services, said in a written statement. “We must take this into account now to avoid cutting later.”

Mills’ aides said the governor was not available for an interview on Friday.

The new projection from the nonpartisan Revenue Forecasting Committee was disclosed with little notice late Friday afternoon in a statement that focused more on expectations that future revenues would level out. A spokesperson said in response to questions that an additional $83 million of the newly anticipated revenue surplus would be available this fiscal year and roughly $24 million in the next.

Mills has long cautioned her own party against using unexpected revenues for excessive ongoing spending that would effectively commit the state to covering the costs in future budgets after the surpluses end. She has pushed instead for one-time spending, including rebate checks to residents and savings for what officials have believed would be a recession. But the economy has remained strong, even as states like Massachusetts, New York and California are confronting post-pandemic revenue shortfalls.

Despite the somewhat-cautious approach, the state’s annual budget has still grown by about $3 billion, from more than $7.2 billion in 2019 to $10.3 billion now, driven largely by $1.2 billion increase in the Department of Health and Human Services budget and the $674 million increase in state funding for education to provide 55% of the costs of public schools.

Mills’ latest supplemental budget proposal, excluding the recent revenue increase, would increase the size of the state budget to $10.4 billion.

As in years past, lawmakers will likely make changes to Mills’ proposal before sending it back for her approval.

Republicans have been calling for structural tax reform amid record surpluses in recent years. But House Minority Leader Billy Bob Faulkingham, R-Winter Harbor, said he doesn’t expect his caucus to continue to push for tax cuts during the budget process this year and will instead look for one-time investments to repair damage from recent storms.

“Republican calls for tax relief have fallen on deaf ears in the last year, leading to the passage of multiple majority budgets by legislative Democrats,” Faulkingham said. “Republicans are hopeful projected excess revenue will allow for the immediate funding of the disaster relief bill funding repairs to working waterfronts and other infrastructure.”

CALL TO SUPPORT NURSING HOMES

Senate Minority Leader Trey Stewart, R-Presque Isle, said he’s looking to secure more funding for nursing homes, which have been struggling financially and closing in recent years.

The Presque Isle Rehab and Nursing Center, which is in Stewart’s district, recently announced that it planned to close.

“Republicans have long stood for more tax relief and Mainers being able to keep more of their hard-earned money,” Stewart said. “As tax collections have kept going up, spending by Democrats has gone up along with it in lockstep. However, we also recognize the need to make key investments to help address several ongoing problems our state is experiencing.”

Stewart said that nursing homes across the state face a combined budget deficit of $120 million.

“Maine is aging and about a third of all Mainers will be aged 65 and older in the next decade,” he said. ” We need to invest in these facilities that will only grow more important as we grow older.”

Investing money into nursing homes and other programs to help older Mainers, like preserving an expansion of the state’s Medicare Savings Program, seems to have the support of Senate Democrats.

A spokesperson for Senate President Troy Jackson, D-Allagash, said Senate Democrats “respect and share the governor’s desire to be both fiscally conservative and responsible.” But they also see a need to make more investments, she said.

“There is a path forward that allows for smart, responsible investments in our state and also ensures we have the reserves necessary to respond to a possible economic downturn,” spokesperson Christine Kirby said.

“The new revenue projections only strengthen the Senate President and Senate Democrats’ resolve to protect recent investments made in child care and older Mainers (i.e. Medicare savings program) in the previous budget and push for funding to support communities affected by extreme weather events and make up for the $30 million shortfall in nursing homes and long term care.”

House Speaker Rachel Talbot Ross, D-Portland, did not respond Friday to questions about the projections.

The Mills administration already has been putting away money for future needs. The state’s budget stabilization fund, or so-called rainy day fund, sits at nearly a billion dollars. The $968.3 million balance is a record high and at the statutory limit of 18% of general fund revenue from the prior fiscal year.

But that hasn’t stopped Mills from socking more money away in other places. Her current budget proposes putting $107 million in a temporary reserve account for the next biennium to support current budget commitments in anticipation of flat revenues and increased costs for existing programs.

And that’s on top of other stabilization accounts Mills created for specific programs, like preserving the state’s commitment to provide 55% of the funding for public education and addressing forever chemicals, known as PFAS. Those accounts have $15 million and $20 million, respectively.

Mills also has built up a reserve account for MaineCare, which she expanded in 2019.

PLENTY OF OTHER NEEDS

There is no shortage of ideas about how to spend additional revenue, with some lobbyists calling on lawmakers to provide more funding, including for child care, nursing homes, health care, housing, mental health and the like.

Kathy Kilrain del Rio, the advocacy and programs director at Maine Equal Justice, a nonprofit civil legal aid and economic justice organization, hopes lawmakers use some of that money to establish a rent relief program to help keep low-income residents from becoming homeless.

Kilrain del Rio agrees that the state should be fiscally responsible, but noted that the state’s rainy day fund is maxed out. She said it’s difficult to explain to people why the state is not doing more to help people who are struggling.

“If we have money available to us to help people meet those basic needs, we should use it,” she said. “We have a full rainy day fund, but we have people drowning. We have money that could help people stay housed when we have rising evictions for individuals and families.”

Mills also is facing pressure from the state’s largest labor union to increase wages for state workers to fill hundreds of open positions.

Adam Zuckerman, a lobbyist for the progressive Maine People’s Alliance, agrees that that the funding should be used to create a rent relief program and to address state worker wages. He’d also like to see more investment in recovery homes to help address substance use in the state, mental health and health care, among other things.

The projected surplus, Zuckerman said, also makes the governor’s proposed cutbacks, delays and reforms in General Assistance, the Medicare Savings Program for elderly residents and child care subsidies more troubling.

“At a certain point, fiscal restraint becomes fiscal irresponsibility,” he said. “We have all these needs and huge surpluses and projected surpluses into the future and a rainy day fund that’s at its limits, and we’re not using those funds to address needs that will only grow.”

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