The Mills administration last week announced it would curtail allotments to the state’s general and highways funds to offset revenue losses caused by the COVID-19 pandemic.
The cuts totaling $244.8 million avoid — for now at least — deep reductions in program spending, layoffs or drawing from the state’s “rainy day” fund. But it is a short–term solution, relying heavily on federal CARES Act funding to make up the difference. The administration urged Congress to provide further assistance to state and local governments. Maine has a hard road ahead as it grapples with the continued pandemic, large projected revenue losses in the coming years, increased unemployment and a struggling economy.
In July, the Maine Revenue Forecasting Committee projected that the state would face a $528 million revenue shortfall in the general fund for the budget cycle ending June 30, 2021. The virus’s ripple effect on state revenues will last longer than that. Even if Congress reaches a consensus on further pandemic relief funds, Maine will still be digging itself out of this hole for years to come.
A full rebound in hard-hit industries such as tourism seems unlikely until the virus is contained. Meanwhile, struggling Mainers will be seeking help to heat their homes, access medical care, feed their families and keep a roof over their heads. Slashing programs that provide that help when it is most needed would be devastating.
Going forward, the state must continue to be cautious on both the public health and fiscal fronts. In a Wall Street Journal survey of economists, the vast majority (91 percent) agreed that a strong economic recovery hinges on effectively containing COVID-19. In the meantime, Maine must continue to curb nonessential spending. But a slash and burn approach to the budget could further harm Maine’s people and its economic recovery. Former U.S. Treasury Secretary Robert E. Rubin wrote in a 2017 opinion piece in the New York Times that anti-poverty programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) “are vital public investments with high rates of return.” Rubin said the programs improve productivity, increase workforce participation and reduce costs associated with crime, malnutrition and poor health. In other words, cutting such programs could cost more than it saves. Similarly, decimating education funding would be short-sighted. School districts are facing pandemic-related expenses and piloting new learning formats while trying to prevent students from losing ground. Maine cannot afford for kids to fall further behind.
But money to balance the state budget has to come from somewhere. Maine will have to aggressively pursue and facilitate opportunities for growth. Wood products, aquaculture and renewable energy are promising industries capitalizing on the state’s natural resources. There is also the possibility of attracting new residents to live and work — remotely — in the Pine Tree State. They will have the opportunity to witness the resiliency of Mainers firsthand. The path forward is rocky, but it is not impassable.