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Two Major Reports Show Strong Financial Outlook for Maine Under Governor Mills

First time in at least two decades that Maine is forecasted to meet its financial obligations, as approved by Maine voters and state lawmakers.

Two significant reports this week show that Maine is prepared to withstand significant economic challenges because of Governor Janet Mills’ strong fiscal management.

The “Stress Test (PDF),” released jointly by the Consensus Economic Forecasting Commission and the Revenue Forecasting Committee, found that Maine’s Budget Stabilization Fund contains enough funding to help the State withstand a significant loss in revenue due to a moderate recession and allow for 15 months of funding in a severe recession providing for a thoughtful approach to balancing the budget, should one occur. Under Governor Mills, the account commonly known as the “Rainy Day Fund” has quadrupled to a record-high of $895.9 million. This historic level represents 16.6% of prior year General Fund revenues, just shy of the statutory cap of 18%.

A separate “Structural Gap (PDF)” analysis of projected revenues and expenditures conducted by the State Budget Bureau also affirmed Maine’s strong financial standing. General Fund revenues from Fiscal Years 2022 to 2025 are projected to exceed the level of funds appropriated, allocated, or otherwise committed by state law. This means that Governor Mills has prevented a structural gap in the budget and, for first time in at least two decades, ensured that Maine is forecasted to meet its financial General Fund obligations as approved by Maine voters and state lawmakers.

“Maine has experienced a strong economic recovery from the pandemic and because of deliberate choices made by my Administration to safeguard our resources, our state is also prepared to withstand future economic challenges,” said Governor Janet Mills. “I am proud that our savings are at a record high and that we have closed the longstanding structural gap in our state budget, finally ensuring we will be able to meet our obligations to Maine people.”

“These reports affirm that Governor Mills’ responsible fiscal management has well-positioned Maine to withstand economic headwinds that may come our way,” said Kirsten Figueroa, Commissioner of the Department of Administrative and Financial Services. “Over the last four years, Governor Mills’ Administration has invested directly in Maine people, provided one of the strongest pandemic relief measures in the nation, and prepared Maine for future challenges.”

The Stress Test

The Stress Test (PDF), reported by the Consensus Economic Forecasting Commission and the Revenue Forecasting Committee, analyzes the ability of the Maine Budget Stabilization Fund – or the “Rainy Day Fund” – to compensate for a decline in revenues because of a moderate or severe recession, should one occur.

In each of her biennial budget proposals, Governor Mills proposed transfers to the Rainy Day Fund. While these proposals were adjusted by the Legislature, Governor Mills initiated over $45 million in deposits: $19.8 million in 2019, $17.4 million in 2020, and $8 million in 2021. Additionally, buoyed by strong revenue performance, the year-end ‘cascade’ deposited $18.1 million in 2019, $223.6 million in 2021, and $401.9 million in 2022 to the Fund. Thanks to the Governor’s efforts, the Rainy Day Fund currently stands at its highest level ever.

In addition to preparing Maine to withstand a decline in revenue, a strong Rainy Day Fund also helps Maine achieve lower interest rates when it borrows money on the bond market. Earlier this year, Moody’s Investor Service and S&P Global Ratings affirmed Maine’s strong credit ratings and stable outlooks for Maine’s general obligation debt.

Although not considered as a part of the “Stress Test” analysis, under Governor Mills, the state has funded or created additional stabilization accounts meant to ensure the state can meet its obligations. The Medicaid Stabilization Fund currently has a balance of $42.5 million, protecting against a loss of MaineCare services during an economic downturn. The new Education Stabilization Fund currently has a balance of $15 million, ensuring the State can meet its statutory responsibility to fund 55% of the cost of K-12 education.

General Fund Four-Year Revenue and Expenditure Forecast report

Every two years, Maine’s State Budget Bureau is required to issue a report (PDF) projecting revenues and expenditures over current and upcoming biennia. Historically, when expenditures have been projected to exceed revenues, governors have proposed statutory changes to avoid a structural gap in the budget. This is necessary to meet Maine’s constitutional balanced budget requirement.

Thanks to smart financial decisions by Governor Mills, forecasted revenues are sufficient to meet all General Fund obligations over the next biennium. The Bureau of Budget’s review is based on enacted appropriations, revenue projections, and other legislative initiatives. The analysis also factored in the state’s municipal revenue sharing and K-12 funding requirements.

Under Governor Mills’ leadership, Maine met its statutory K-12 funding obligation for the first time since voters approved the requirement in 2004. Maine also invested in revenue sharing with Maine’s cities, towns, and municipalities, meeting its statutory obligation of 5% revenue sharing for the first time since 2009. Based on current projections, Maine is expected to be able to meet these requirements, and all other General Fund obligations in enacted law, for the first time in at least two decades.