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Budget Recommendations for Critical Investments Make Sense for Mainers

Last week I sent Governor-elect Janet Mills my administration’s recommended budget proposal. I called her attention to key measures I believe we must take to maintain the state’s fiscal health, drive economic growth, and be good stewards of the state’s property.

A new Governor has only a few weeks to craft a budget proposal. Our development of the next biennial budget should be useful to the Governor-elect and her team.

The state’s cash pool has grown substantially since fiscal year 2012, from approximately $500 million to nearly $1.5 billion today. During that period, Other Special Revenue – typically generated by licensing and fees – has quadrupled to more than $400 million. 

These balances are due to sound financial management and a strong economy. Now our state should put the money to work on behalf of all Mainers. 

Our most important recommendations address the big-ticket items that drive most of state spending and currently create the structural gap. 

First, we recommend introducing a hospital tax to pay for Medicaid expansion. Costing about $100 million annually, the Legislature has not yet identified a sustainable means to fund Medicaid expansion. 

Since the hospitals stand to benefit by at least $100 million from expansion, and because the federal government will reimburse them part of the tax, these revenues would more than cover any new tax. The hospitals would still come out ahead.

I also recommended to Governor-elect Mills that Maine invest in broadband expansion using $75 million from Other Special Revenue accounts and following the State Broadband Expansion Plan. This investment will have a big payoff.

My next recommendation centers on the state’s physical plant. When I took office in 2011, the state campus in Augusta was falling into disrepair. 

Our Administration invested in revitalizing older, decaying buildings and constructing new ones. But more needs to be done. Our budget allocates $40 million to continue upgrading the Capitol Complex. 

The plan would include demolishing an older parking garage near the State House and building a new parking garage near the Cultural Building. 

The plan also calls for a new DHHS building built on the old garage’s lot, completing the consolidation of the department’s Augusta office for efficiency. 

Last, the plan would make significant upgrades to the neglected Cultural Building, which houses the State’s Museum, Library, and Archives. 

This much-needed improvement of the state campus will make our Capitol Complex more functional, energy efficient, and visitor friendly. 

When I took office, state employees’ pay had been curtailed. Our Administration restored regular pay raises, and these should continue. We can afford them if the next administration continues to drive efficiencies and maintain disciplined financial management. 

Lastly, Maine is now well-positioned to make a major improvement to our pension system. We’ve crafted legislation that builds on the efforts of the State and Teacher Retirement Plan Working Group, directing them to include pension portability as a required component of its legislative proposal. MainePERS supports this meaningful reform.

I’ve also made recommendations for tax reform. We have record-breaking revenue surpluses. It would be wrong for the State to use these funds as a windfall to fund pet projects with no sustainability if – and when – the economy contracts.

My Administration is working collaboratively with the Governor-elect’s transition team to ensure that the needs of Maine’s people remain the number-one priority.

Thank you.

Paul LePage


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