Gov. Janet Mills, center, speaks while Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services, left, and Sara Gagne-Holmes, commissioner of the Department of Health and Human Services, stand with her during a news conference Friday in the Governors Cabinet Room at the Maine State House in Augusta. Joe Phelan/Kennebec Journal

AUGUSTA — Gov. Janet Mills unveiled a two-year state budget proposal Friday that increases the tax cigarettes while maintaining the state’s free community college program and other administration priorities.

The $11.6 billion proposal is up 10% from the current $10.5 billion budget, although Mills is also bringing forward a $94 million proposal to increase the current budget to $10.6 billion.

The budget for the next two years would raise the excise tax on cigarettes from $2 per pack to $3 and make similar adjustments to the tax on other tobacco products, resulting in about $80 million in new revenue over the biennium.

It would maintain key Mills administration initiatives such as funding 55% of public school education, providing free school meals for all Maine students and contributing 5% to municipal revenue sharing.

It includes $25 million to continue funding the governor’s free community college program, and makes the program permanent by moving it to the state’s baseline budget. It had previously been supported with one-time funds on a budget-to-budget basis.

The budget does not create or fund any new programs or draw on money from Maine’s Budget Stabilization Fund. Also called the “rainy day fund,” it contains $926.5 million, the governor’s office said Friday.

The spending plan includes a number of programmatic changes in the Department of Health and Human Services, including reductions in eligibility for food assistance for noncitizens and reductions in stipends for child care workers, but also includes money to stabilize MaineCare and other investments.

Gov. Janet Mills speaks to reporters about her budget proposal during a press conference Friday. Joe Phelan/Kennebec Journal

Mills described the budget Friday as a difficult one to put together in light of state revenues leveling off, in part due to a decline in increased federal funds during the COVID-19 pandemic, and a projected $450 million gap heading into the next two years.

“With this proposal, we have taken a balanced approach — one that includes investments to maintain core programs, like education funding and health care; that raises revenues in a targeted way to benefit public health; and that makes difficult programmatic changes to save money,” she said.

“There are tough decisions to be made in the coming weeks, but I know the Legislature shares my commitment to enact a balanced budget that is good for both Maine people and the fiscal health of our state.”

DEMOCRATS SUPPORT PRIORITIES

The Legislature will take up the proposal, and amend it, in the coming weeks and months. Mills’ administration had warned lawmakers that spending would need to be kept in check in the next budget given a projected $450 million deficit, plus an additional $118 million shortfall in the current year’s budget for MaineCare, the state’s Medicaid program.

On Friday, Democratic leaders said the proposal provides a good starting point for lawmakers and lauded it for preserving school funding, municipal revenue sharing and access to health care, as well as making permanent the community college program, which provides two years of free community college to Maine high school graduates.

The budget does cover increased costs to support those programs, such as an additional $6 million for free school meals, bringing the cost of the program to $64 million annually, and an increase of $156.6 million to pay 55% of education. Education costs make up about 41% of the proposed budget.

The governor’s proposal also includes $3 million in one-time funding to support affordable housing by helping mobile home residents purchase the parks they live in, and $41 million to support a 4% increase for higher education, including the University of Maine System, the Maine Community College System and Maine Maritime Academy.

“In the coming weeks and months, the members of the Legislature’s budget committee will dig into the details and — after gathering input from their legislative colleagues and the public — find commonsense solutions that address our state’s most pressing needs,” Senate President Mattie Daughtry, D-Brunswick, said in a written statement.

“The budget is one of the most important tasks we have before us as a Legislature, and it is a reflection of our values and priorities,” said House Speaker Ryan Fecteau, D-Biddeford. “In the coming weeks, the Appropriations Committee will work to produce a budget that addresses the issues Maine people are facing, ensures the services they rely on continue without interruption, and – importantly – will provide opportunities for the public to share their perspective on the governor’s budget proposal.”

REPUBLICANS OBJECT TO NEW JOBS, TAXES

Republicans, meanwhile, criticized the budget for increasing spending and taxes too much.

“Maine is already one of the highest taxed states in the country, so we don’t see a need to increase any tax,” said House Minority Leader Billy Bob Faulkingham, R-Winter Harbor.

House Minority Leader Rep. Billy Bob Faulkingham, R-Winter Harbor, gives a Republican Party response after Gov. Janet Mills’ budget proposal press conference on Friday in Augusta.  Joe Phelan/Kennebec Journal

Faulkingham also criticized the proposal for suspending cost-of-living adjustments for MaineCare reimbursement rates, saying it would “stiff the hospitals.” He said Republicans were shocked to see 250 new positions included in the budget.

A spokesperson for the governor’s office said only a portion of those positions will be paid for through the general fund, which comes from state tax revenues, while other positions will be paid for with other revenues such as fees or federal funds.

New positions include jobs at the Maine Department of Safety to address the after-action report published in the wake of the Lewiston mass shooting, positions at the Department of Environmental Protection to assist with PFAS remediation and licensing of projects, and about 28 positions for the Judicial Branch, which is struggling with responding to a backlog in cases, the governor’s office said.

Republicans on Friday also took aim at other tax increases, including a proposal to raise the sales tax on recreational marijuana from 10% to 14%, the revenues from which are expected to be partially offset by a decrease in excise taxes paid by marijuana growers.

And they criticized a proposal to include streaming services like Netflix in Maine’s 5.5% sales tax, something that the governor has proposed before but that hasn’t been approved by lawmakers.

TOBACCO TAX HIKE WOULD BE FIRST IN 20 YEARS

Maine has not increased its cigarette excise tax since 2005, when it went from $1 per pack to $2, according to the governor’s office.

The additional $1 increase would put Maine’s cigarette tax above the average state tax of $1.96 per pack and it would continue to be among the lowest in New England. Massachusetts, Vermont, Connecticut and Rhode Island all have cigarette taxes of more than $3 per pack, while New Hampshire’s state tax is $1.78, according to the Campaign for Tobacco-free Kids.

At a news conference Friday afternoon, Mills said raising the tobacco tax makes sense given that it’s been nearly two decades since there was an increase and smoking continues to contribute to heart disease, cancer and strokes in Maine. “Our current policy doesn’t make sense,” she said. “It’s time to change it.”

The move was celebrated Friday by the Maine Public Health Association, which said the increase in excise tax would reduce youth tobacco use and encourage current users to quit.

“We applaud Governor Mills’ commitment to protecting Maine kids by including a tobacco tax increase in her proposed budget,” Matthew Wellington, associate director of the association, said in a statement. “Raising the tobacco tax reduces youth tobacco use and helps ensure that the next generation grows up free from tobacco addiction and harm. It’s a long overdue step.”

DHHS CUTS AND INVESTMENTS

Mills’ proposal also makes a number of programmatic cuts and some investments in DHHS. The supplemental budget for 2025 includes money to help cover the $118 million gap in MaineCare costs this year, and the governor is proposing $122 million per year to stabilize the program in the next two years.

Other targeted investments for the biennium include $3 million per year to address a federal funding shortfall for victims’ services, $17 million each year to support children in state custody and $3.3 million each year to fully fund nursing facility rate reform.

Mills said Friday that cuts are not easy to make and that the administration tried to minimize disruptions by focusing on programs that haven’t taken effect or been fully implemented yet.

Gov. Janet Mills, center, speaks about her budget proposal as Sara Gagne-Holmes, commissioner of the Department of Health and Human Services, stands with her during a news conference Friday. Joe Phelan/Kennebec Journal

The cuts include eliminating food assistance benefits under the Federal Supplemental Nutrition Assistance Program, or SNAP, for noncitizens who have their work authorizations but are unemployed. The federal program, which is administered by states, prohibits certain noncitizens, including asylum seekers, from receiving SNAP benefits, though Maine is one of five states that currently operates SNAP programs with state funds to assist noncitizens.

Between 2021 and summer 2024, monthly participation in the program rose from about 1,000 beneficiaries to 5,000 beneficiaries, and the Mills administration said Friday that it had warned lawmakers in 2023 about rapid growth. They said that eliminating the eligibility for noncitizens who have work authorizations but are not working would save $7.8 million over the biennium.

Another $7 million could be saved, including some cost savings in the current year, by reducing the number of crisis centers the state plans to open from four to two. Lawmakers last year approved the opening of three new centers, modeled after a successful one in Portland and one that was already planned for Kennebec County, in the wake of the mass shooting in Lewiston.

Mills would eliminate plans for the Kennebec County center and another one in Aroostook County, while keeping in place plans to build centers in Lewiston and Penobscot County. The governor said the bids came in higher than expected on the Kennebec County project and that it is no longer a fiscal reality.

“We’d like to do one in Lewiston because Lewiston is where a high need was exposed this past year, and we’d like to do one in Penobscot,” she said. “But we can’t be all things to all people.”

The proposal also draws back the amount of money the state has been spending to attract and retain workers in the childcare industry, reducing tiered stipends put in place in 2023 that ranged from $275 to $625 per month, to the 2022 level of $200 monthly, an adjustment expected to save the state $30 million over two years.

The cuts drew concern Friday from the Maine People’s Alliance, a group dedicated to progressive social causes, which said they will have a significant impact on Mainers’ ability to access essential services like child care. The group suggested the state look at additional ways to increase revenues, such as ending tax breaks for big businesses, and noted that Maine’s Budget Stabilization Fund has more than $900 million in it.

Mills said Friday that she is not in favor of dipping into the rainy day fund. “That’s for unique circumstances that have not existed yet,” she said.