Budget is balanced without new tax increases
On Friday, January 8, Governor Janet Mills released her biennial budget for Fiscal Years 2022-2023, also known as the Part A and Part B Budget. The good news for Maine’s business community is that Gov. Mills has balanced this budget without raising taxes.
There has been widespread fear during the past several months that, because of originally reported $800-plus million structural gap for FY 2022-2023 and the originally-reported $500 million structural gap for FY 2021, potential tax increases may be used to fill the gaps. Those figures have since be reduced significantly due to revenue re-projections by the Revenue Forecasting Commission, to roughly $395 million for the biennial budget and roughly $255 million for the supplemental budget required to balance this year’s budget. Revenues at the state level exceeded expectations in the areas of sales and use taxes and individual income tax, even though revenues were significantly lower in the areas of tourism with meals and lodging, most notably.
The Governor was able to hold the line on any revenue increases to the budget with the use of a variety of curtailments, the use of Federal COVID-19 funds, hiring freezes, etc. There is a slight increase in the overall budget of $57 million, which has been attributed to mandatory increases due to teacher retirements and health insurance and other built-in but unavoidable costs. The budget also includes $61 million more for the State’s Rainy Day Fund, bolstering it to $320 million which reaffirms the states bond rating at Aa2.
Some of the highlights of the budget include $45 million for education funding; $1.8 million for broadband expansion into rural areas; $15 million for the homestead program; $8 million for COVID-19 related expenses, such as testing, vaccine support for isolated areas, etc.; and, $7.5 million for mental health and substance abuse.
Even though the Governor has presented this budget as is without tax increases, the Legislature will ultimately decide the exact budget specifics, opening the door for a discussion around the potential for tax increases. In addition, there are several bills that will be referred to the Joint Standing Committee on Taxation that will likely deal with issues such as increasing the corporate income tax rate, tax havens, local options taxes, estate tax, and individual income tax. It’s hard to say exactly what these bills will do specifically, because only bill titles are currently available. Despite the Governor’s budget document containing no new taxes, the Legislature may have other ideas.
During the next few months, the Joint Standing Committee on Appropriations and Financial Affairs will hold public hearings and work sessions on the various sections of the budget, most likely virtually. If you have any questions, please contact Linda Caprara by calling (207) 623-4568, ext. 106, or by emailing email@example.com.