Maine’s state government finished the 2023 fiscal year with a $141 million surplus, continuing years of strong revenues that have exceeded forecasts and prompted Republican lawmakers to renew calls for income tax cuts.
The money left over when the fiscal year ended June 30 filled the state’s budget stabilization account, also called the rainy day fund, with a record high $968.3 million, Gov. Janet Mills said in a statement. A new law included in the current two-year budget also means $65 million of the surplus will be spent on affordable housing programs.
While the surplus revenues have resulted from stronger-than-expected economic activity coming out of the pandemic, the Democrat said her administration’s budget decisions made sure the maximum amount of surplus funds were set aside to prepare for future downturns.
“Maine is better prepared today to withstand an economic downturn than at any other time in state history because of smart, deliberate financial choices by my administration,” Mills said. “Since taking office, we have quadrupled the rainy day fund and produced balanced budgets in partnership with the Legislature, all while making historic investments in Maine people to improve their lives and livelihoods. We will continue to work hard to deliver the resources and support that Maine people need to thrive and succeed.”
Republicans, however, have repeatedly criticized Mills and the Democrats who control the Legislature for not reducing the state’s income tax in the face of the recurring surpluses. Democrats have responded by arguing that such tax cuts would come back to haunt the state when the economy slows and revenues fall.
Maine has been collecting unprecedented levels of revenue since the pandemic hit in 2020. Like other states, Maine has benefited from a massive influx of federal spending meant to address COVID-19 and its aftermath, while seeing low unemployment, rising wages, and strong consumer spending despite concerns about inflation. Higher wages and increased spending have generated more income and sales tax revenues than forecasters predicted.
State budgets are built on revenue projections from a nonpartisan revenue forecasting commission, which has routinely increased its projections as revenues have outpaced projections. Yet, even after revising last year’s budget and sending rounds of rebate checks to Maine residents, the state still ended the fiscal year with a $141 million surplus.
A total of $52.4 million of the surplus was added to the state’s rainy day account, bringing it to its statutory maximum of 18% of actual General Fund revenue.
With the rainy day fund full, the additional revenue will be deposited into a series of accounts prioritized by the Legislature, including one for housing security.
Mills said that a $65 million will be used for Maine Housing programs – $35 million to build affordable housing in rural areas through the Rural Affordable Housing Program and $30 million for incentives for the Low Income Housing Tax Credit Program.
That funding is part of what the administration has described as “historic housing investments” in the current two-year budget, including new state funding for a housing first program, which provides stable housing to people who are chronically homeless so they can address other challenges, such as addiction or mental health issues.
An additional $3.9 million of surplus funding is being deposited into the Highway Bridge and Capital Fund.
The rainy day fund is used to help balance state budgets when revenues fall below what the forecasting commission expects, avoiding deficits that would otherwise force cutbacks in state services.
“The milestone of a fully funded Budget Stabilization Fund is a testament to the fiscally responsible leadership of the Mills administration,” said Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services. “Having these funds set aside, positions the state to meet its commitments to Maine residents in the event of a rainy day.”
Note: This story was updated Friday, Aug. 18 to clarify that the surplus and funding for affordable housing had been included in the final budget package approved in June.
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