State revenues are expected to exceed previous estimates by nearly 10 percent in the current two-year budget cycle that began July 1, the governor’s office announced Tuesday.

The state’s nonpartisan Revenue Forecasting Committee is expected to upgrade revenue forecasts by $822 million for the fiscal 2022-23 biennium. The increase is primarily attributed to strong economic activity and federal recovery funds coming to the state, according to the governor’s office.

Based on the latest revised estimates, Maine officials anticipate a nearly 10 percent increase in General Fund revenues over the previous two-year budget cycle, from $8.49 billion generated in fiscal years 2020-21 to nearly $9.33 billion in fiscal years 2022-23.

The increased revenue projection is based on a brighter economic forecast for Maine, the result of a prolonged period of low interest rates and a continued influx of federal funding. Other positive economic indicators include increased consumer spending and higher corporate earnings.

The Mills administration is expected to propose a supplemental budget in the coming weeks for the Legislature to review. Lawmakers must ultimately decide what to do with the unanticipated revenue.

Mills said in a written statement that the forecast reflects responsible fiscal management and federal recovery money, which has helped push the state’s Rainy Day Fund to a record high of $491.9 million – double the amount when she took office. She noted that Maine’s Gross Domestic Product had surpassed pre-pandemic levels.

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However, Mills also acknowledged that many state residents are facing increased costs for utilities and other necessities. She said she would look to help offset those costs in her supplemental budget.

“The increased costs of electricity, home heating fuels, gas at the pump, and other necessities are putting a real strain on the budgets of Maine people, which is even more difficult during the harsh winter months,” Mills said. “I would like to examine ways we can use this additional revenue to provide direct financial relief to folks hard hit by these increases to help them through these difficult times.”

Senate and House Republicans responded to the revised revenue projection by calling on Mills to reduce income taxes.

In a joint statement, Republicans pointed to a previous proposal to provide $300 million in income tax relief to people who worked throughout the pandemic, by exempting an additional $10,200 in income from state income taxes. That would have provided an estimated average tax cut of $750, they said.

“Designed to mirror the benefit provided to those who received unemployment compensation during the pandemic, the proposal was rebuffed by Democrats unwilling to give up new spending,” Senate and House Republicans said in a joint statement.

“The increases she is referring to are hitting Mainers hard, and are the result of feel-good policies that drive up the cost of living for all but the super wealthy,” they continued.

The largest projected dollar increases over the original budget projections are sales and use taxes, which are up 11.7 percent, or $209 million, this year, and up 3.1 percent, or $204.5 million, next year.

Marijuana sales are included in sales and use taxes, but the new forecast includes lower revenue generated from marijuana sales than originally projected. Sales tax revenue on marijuana was revised down $700,000 from $13 million for the current fiscal year, although $18 million in sales continues to be projected for next year.