Maine lawmakers weigh plans to spend excess tax revenue
Maine lawmakers expect a windfall of excess tax revenue over the next two years and are mulling plans to spend the money.
Governor Janet Mills’ administration says the state’s general fund revenue is up $822 million or 9.7% for fiscal years 2022 and 2023 from the original biennial budget projections. Mills plans to use the extra revenue “to provide direct financial assistance” to those hard hit by the pandemic.
But on Tuesday, members of the Legislative Assembly’s Appropriation and Financial Affairs Committee heard from state finance officials who warned that the pandemic recovery remains uneven and warned that the economic outlook remains murky.
Michael Allen, chairman of the state’s nonpartisan revenue forecasting committee, said the state was on a solid fiscal footing, but there was uncertainty about the future of the economy amid the increase in COVID-19 infections and the emergence of new highly contagious strains of the virus. .
“We can’t predict the pandemic, which makes economic forecasting even more difficult,” he told the panel. “We are in a volatile environment.”
Amanda Rector, a state economist and revenue committee member, echoed those concerns and said other factors, including rising inflation rates, could impact India’s economic recovery. State.
“There is a risk of inflation continuing into 2021 and 2022,” Rector told the panel. “Interest rates are expected to rise sooner than expected.”
Allen stressed that state revenue forecasts will need to be revised if President Joe Biden’s reconstruction plan is approved by Congress. The legislation, which has been approved by the House of Representatives, would provide states with more money for health care and social welfare programs.
Republican lawmakers want to use excess tax revenue to provide tax relief and have opposed earmarking one-time funds for programs that will require ongoing revenue.
Last month, House and Senate GOP leaders introduced a $300 million income tax relief proposal for people who worked during the pandemic. The plan provided a tax reduction for 2020 by exempting additional income of $10,200 from state income tax.
“Energy costs are skyrocketing, home and auto fuel prices are at an eight-year high, and inflation for consumer goods and basic necessities is rising at the fastest rate ever. since 1990,” the GOP lawmakers wrote. “We will not support giving people’s money back to them through special interests, advocacy groups and lobbyists who frequent Augusta.”
In July, Mills signed a two-year, $8.5 billion contract budget which includes pandemic “risk” payments to workers and a historic level of school funding.
A key provision of the proposal includes $187 million to meet the state’s obligation to pay 55% of local education fees, which was required by prior state law.
The plan also includes one-time “risk” payments of $275 for workers earning less than $75,000 a year, or joint filers earning less than $150,000, who worked during the pandemic. The state began sending out these bounties last month.
Maine officials say a series of factors, including low interest rates, federal stimulus measures and increased consumer activity, have improved the state’s economic outlook.
Mills is expected to unveil his supplementary budget proposal before lawmakers meet again in January.