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November 25, 2024

RFC also projects additional one-time revenue for FY 25 driven by the shift in revenue due to storm impact and interest earnings

AUGUSTA, Maine €“ Following its meeting today, Maine's nonpartisan Revenue Forecasting Committee (RFC) is expected to upgrade the State's General Fund revenue forecast for Fiscal Years (FY) 2026 and 2027 by approximately $202.2 million, which includes $113.5 million in FY 26 and $88.7 million in FY 27. The RFC also recognized an additional $247.9 million in one-time money for FY 25.

The updated forecast for the next biennium continues to represent a leveling-off of revenues after years of rapid revenue growth immediately following the pandemic. The $247.9 million in additional one-time revenue for the current Fiscal Year is driven by a delay in revenue due to the extensions of tax return filing dates by the Internal Revenue Service and Maine Revenue Service following last winter's extreme storms as well as significant interest earnings on the state's cash pool.

The revenue adjustment follows a recent report from the Department of Administrative and Financial Services projecting a $636.7 million structural gap €“ the difference between projected revenues and projected expenses €“ in the General Fund for the next biennium. 

While structural gaps are common, the report underscores the importance of the Governor's prior warnings that revenues are flattening and budgeting should be done responsibly. To that end, in her last supplemental budget proposal, the Governor proposed saving $107 million for use in the FY 26-27 biennium €“ a proposal largely rejected by the Legislature. 

Maine's Constitution requires a balanced budget, which means the projected revenue adjustments, along with structural gap considerations, will prompt the Governor to submit a supplemental budget for FY 25 along with a biennial budget proposal for FY 26-27 for the Legislature's consideration when it meets in January for the next session.

    "These projected revenues should not be seen as an opportunity for significant new spending. As my Administration has consistently warned, this next budget is going to be tight, and rather than create new programs, these revenues should be used to meet our existing obligations, like 55 percent of education, municipal revenue sharing, and health care," said Governor Janet Mills. "Come January, I intend to introduce a lean budget proposal that will honor these existing commitments to the greatest extent possible, with any new investments seriously limited. The State of Maine has enjoyed significant new revenues over the past several years, which has allowed for investments in important new programs that have benefited Maine people. Now the Legislature's focus must be on maintaining them as much as possible, not on growing the budget."

    "Our Administration has been warning that revenues are flattening and that the Legislature must take a cautious approach to spending, which is why the Governor had proposed saving more than $100 million during the last session," said Kirsten Figueroa, Commissioner of the Department of Administrative and Financial Services. "While the Legislature didn't agree with that proposal, the budgetary pressures still exist €“ programs continue to cost money while revenues are leveling off. Lawmakers will need to contend with this fact, and we hope they agree with us that the priority should be to continue funding the programs they previously approved rather than trying to create more. This approach will be crucial to the long-term stability of the budget."

The State of Maine experienced significant revenue growth during the pandemic €“ revenues that were appropriated in a bipartisan manner to various programs by the Legislature. General Fund revenues have since plateaued and grow at a more limited and modest rate (PDF) of less than one percent per year on average, when compared to revenue growth during the pandemic.

The RFC's projections are based on the November 1, 2024 economic forecast (PDF) from the independent Consensus Economic Forecasting Commission (CEFC). The CEFC does not anticipate a recession during the current forecast period, but did recognize the ongoing uncertainty in the economy. The CEFC made only minor changes to key economic variables used by the RFC in their revenue forecast.  While the CEFC was more optimistic about calendar year 2024, the only meaningful changes made to the forecast for CY25-CY29 was to personal income growth, but even that more optimistic forecast was relatively small.

Under Governor Mills' leadership, Maine's Budget Stabilization, or Rainy Day Fund, sits at $908.3 million, just under the statutory maximum of $968.3 million, an increase of more than $690 million since taking office in 2019. In May of 2024, Moody's upgraded Maine's credit rating from Aa2 to Aa1, their second highest possible rating.  In May of 2023, Moody's upgraded their outlook from stable to positive and Standard & Poor's affirmed their AA rating and stable outlook.

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