Maine's Crumbling Budget

Governor Janet Mills has pushed Maine to the brink of fiscal insolvency, and now wants us to go over the edge

Friday of last week, Maine Governor Janet Mills unveiled her new biennial budget for Fiscal Years 2026-2027, which proposed to spend a staggering $11.63 billion over the next two-year period. That total represents an 11.05 percent increase from the prior biennium’s general fund expenditure, which was $10.5 billion.

You read that right: Maine’s budget is going up by more than a billion dollars at a time when Governor Janet Mills is telling us publicly that the state needs to tighten its belt, and she will be the tightener-in-chief.

For months, Mills has been warning the public and the Maine Legislature of supposedly “flattening revenues” and the need for prudent, austere fiscal management in response. Mills and her administration have pointed to a projected $450 million structural gap for this next budget cycle, and recently added additional alarm by announcing a $118 million shortfall in our Medicaid program (MaineCare) in the current fiscal year.

All of this, Mills told us, meant that Maine had to buckle down and prepare. We could expect “cuts” in some services, and the situation was so dire that she even indicated she would be willing to (once again) break her campaign promise not to support tax increases in order to fix a problem that was not her fault.

But we were all of us deceived, because there are (of course) no cuts in this budget, and in fact—as we have seen over and over again during Mills’ six years as governor—the reckless orgy of spending has only exacerbated itself.

This budget is a perfect storm of mismanagement, ballooning welfare costs, ill-conceived expansions of government, and unrestrained spending. It plows forward with the same ill-fated approach we’ve witnessed from Mills since she first took office: explosive spending in nearly every facet of state government, combined with gimmicky revenue “enhancements” (new taxes and fees) to paper over the ever-widening cracks in our fiscal foundation.

And worse? Mills seems intent on lying about what’s happening.

I wish I could say it came as a surprise. But truth be told, we’ve been careening down this runaway track for years, all thanks to the fiscal recklessness of Mills and her allies in the Legislature. So first, some background on how we got here.

From LePage to Mills

Whatever your feelings about former Governor Paul LePage, there is something that even his staunchest political adversaries will admit, if you get a few brews in them: he left Maine with a far sturdier fiscal house than what we see today.

When LePage took office in 2011, Maine had just weathered the financial crisis, which shattered state budgets all over the country and gave them bleak employment prospects. Maine was no exception. But through fiscal discipline, government reform, and an unrelenting focus on controlling spending and taxes, LePage managed to stabilize the state’s finances, and even leave a sizable surplus for the incoming Mills administration. (A surplus she immediately spent.)

LePage’s final biennial budget (FY 2018-2019) came in at $7.1 billion, which was by no means a shoestring budget, which represented roughly $1 billion in spending growth over the first budget that was passed ($6.1 billion for FY 2012-2013) in his tenure. During the LePage years, the governor would frequently propose a carefully considered budget, and the Legislature would amend it upward, often times by hundreds of millions of dollars. If LePage had actually gotten what he wanted, it is likely that his final budget would have been well under $7 billion.

Mills, who campaigned as a pragmatic moderate, and the most fiscally conservative Democrat running at the time, went to work immediately after her election disproving her campaign rhetoric.

In her first budget proposal in 2019, Mills exploded state spending to more than $7.9 billion, an increase of just under $1 billion, doing in one year what her predecessor had done in eight.

Yet she had far worse cooking up her sleeve in 2021, at the height of the COVID-19 pandemic. Unhappy having to work with minority Republicans on the budget, she engineered a politically cynical gambit whereby she would pass a “back to basics” framework budget with only Democratic votes, and then return later in the year to pass the goodie bag of progressive wish-list items, accelerating the reckless spending binge while entirely cutting Republicans out. After everything, she had raised spending another $600 million to $8.5 billion in the 2022-2023 biennium.

She did it again after winning re-election, proposing another irresponsible budget in 2023, and once again she lied to the people of Maine, feigning interest in bipartisanship while running another Democrat-only budget. This time, spending climbed to an almost unbelievable $10.5 billion when all was said and done.

We should never forget the majority-budget games that Mills and the Democrats have played, to shove these spending monstrosities through the Legislature.

Now she is proposing a budget of $11.6 billion, even though she is, at the same time, croaking about “revenue shortfalls.” This means that she has raised state spending by roughly $4.5 billion in six years.

For comparison’s sake, if you were to calculate the value of Governor LePage’s final budget in today’s dollars, adjusted for inflation, it would equal roughly $9.1 billion, or more than $2.5 billion less than the budget just proposed by Mills.

How Mills Has Gotten Away With It

Janet Mills has, for years now, claimed that her budgets represented needed investments in Maine after a supposed dystopian hellscape had existed in Maine prior to her arrival. She has also claimed, due to the state’s balanced budget requirement, that she has been a responsible steward of Maine’s finances.

In reality, though, she has been among the luckiest politicians in Maine history.

There have been two abnormal phenomena that have existed during her tenure that have served to mask her fiscal imprudence: a pandemic, and historic inflation.

Pandemic Relief

The COVID-19 pandemic didn’t just upend public health—it also showered states, including Maine, with a tsunami of federal money that masked the real cost of unchecked spending. States collectively received hundreds of billions of dollars in pandemic relief through packages like the CARES Act and the American Rescue Plan, propping up budgets that would have otherwise faced serious shortfalls. In Maine, Governor Mills’ administration benefited from an estimated $7.6 billion in federal pandemic funding—more than LePage’s final biennial budget—which effectively served as a massive bailout and hid the true scale of her fiscal irresponsibility.

Much of that aid was channeled into non-budgetary areas, but much of it also provided the state of Maine with cash that it could either use in its general fund, or could use to replace money that would’ve come from the general fund elsewhere, freeing up the funds to be spent on other priorities.

This Federal aid gave Maine a short-term windfall, allowing Mills to avoid difficult decisions and gloss over the fact that she was simultaneously layering new programs on top of an already swollen budget. This influx of cash created an illusion of prosperity, letting Mills tout so-called “record investments” and handing out relief checks while ignoring the structural imbalances lurking beneath. Pandemic-driven inflation also pushed up sales and income tax receipts, further inflating revenue projections and giving Mills one more reason to pretend the party would never end.

Speaking of higher tax receipts from unusual economic activity…

Inflation Revenue

It is no secret that since 2021, the United States has experienced crushing inflation, largely induced by the Federal Reserve’s loose money prime pumping and the trillions spent by Congress in the aftermath of the pandemic. In June of 2022, this inflation reached a peak over 9.1 percent, measured annually.

This inflation has been very bad for consumers, but has been a dream come true for otherwise reckless politicians like Mills.

Here’s how it works: when prices rise, all taxes associated with commerce also rise. When you used to buy a widget for $10.00, a 5.5 percent tax would add an additional 55 cents onto the bill, bringing the total to $10.55. If that same widget is now $15, the same tax rate would soak you for an additional 83 cents, rather than 55 cents, bringing your bill to $15.83 and allowing the government to pocket more money overall.

It might not sound like a lot, but when it is multiplied over the course of millions of transactions, those pennies add up.

But it doesn’t end there. When prices go up, workers start to demand more money to compensate, resulting in rising wages. As wages go up, so too do the income taxes that are collected from those increasing wages, providing yet another windfall for state government.

These two complimentary realities have conspired together to provide the state with an illusion of wealth over the course of six years. Mills went from relying on a surplus handed to her from LePage to balance her first budget, to relying on the seemingly unending surpluses fueled mostly by inflation. All the while structural problems have been hidden, and remained unresolved. Indeed, many got worse.

And all along, it was the Maine people that were financing this farce.

Where We Stand Now

Mills has been doing a masterful job of spinning her incompetence into reasonable prudence, and all along no one seems interested in calling her on it.

Here’s what is going on, in a nutshell: we continue to see ridiculous and unsustainable revenue growth this year, just like prior years, but the house of cards Mills has built on spending is now finally crashing down around her, and it is causing a shortfall that is not a shortfall.

And she is using her self-created shortfall to pretend she is cutting spending, when she is not.

The story of Maine’s $450 million structural gap reads like a slow-motion train wreck—predictable, preventable, and the result of Mills’ own irresponsible expansions. She expanded government endlessly, put the state on the hook for permanent spending paid for with temporary money that is now gone, and decided to insist upon an empty pile of worthless spending on pet progressive projects.

Then there’s MaineCare, which is both a problem in this current budget cycle, and a long-term problem that will continue to crop up over and over again in the future.

MaineCare is a budget-sucking black hole into which billions of state and federal dollars vanish with mind-numbing speed. While it is an essential program, we have seen it grow out of control in the past with unjustifiable expansions of eligibility under Governor Angus King and Governor John Baldacci. Those expansions bankrupted the system, and forced Governor LePage to rein in the program.

Mills, for her part, decided to expand Medicaid coverage to able-bodied childless adults in one of her first acts in office.

Medicaid expansion has historically run far over its projected cost nearly everywhere it has been done. MaineCare is an especially dramatic example, ballooning far beyond the rosiest projections that Mills used to justify her approach. Now Maine is staring down the barrel of a $118 million shortfall this year alone.

Mills has been attempting to spin all of this—both the structural gap shortfall, and the Medicaid shortfall—as unexpected events that “just happened” to Maine. They are, to her and the dutiful media stenographers who uncritically reprint her spin, a problem which no one could foresee.

Except that some of us did foresee it, and tried to warn people.

The Final Mills Budget Proposal

The proposal is, of course, a gigantic $11.6 billion mess.

If you are curious where the budget bloat comes from, you can refer to Table A-1 from the governor’s overview document, which lists the totals from the 2024-2025 biennium, against the totals she is proposing for the next budget.

There are, of course, many obscene spending hikes in the budget. No single item, though, holds a candle to the Maine Office of Community Affairs, which has seen a proposed increase of—wait for it—8,251.97 percent, from just a little over $170,000 to $14.2 million.

Why the increase? Apparently community affairs is no longer going to be an executive agency, but will instead “foster communications and partnerships across state agencies and between the State and communities in this State.” Apparently that means devoting funds to coastal zone management, addressing “climate challenges” through community service and volunteerism, and create a housing opportunity program and fund, which will be used to encourage and support development of additional housing units in Maine.

Of course this office isn’t alone. Certainly not, when the overall budget is increasing by more than 11 percent.

The ten state departments that saw the largest increases in spending account for growth of $1.1 billion over the prior budget. This includes:

• Department Of Health And Human Services—Increase of $565.53 million

• Department Of Education—Increase of $254.53 million

• Department Of Corrections—Increase of $54.68 million

• Board Of Trustees Of The University Of Maine System—Increase of $46.74 million

• Judicial Department—Increase of $43.09 million

• Maine Community College System—Increase of $39.76 million

• Maine Commission On Public Defense Services—Increase of $37.34 million

• Department Of Public Safety—Increase of $34.83 million

• Department Of Agriculture, Conservation And Forestry—Increase of $22.71 million

• Department Of Inland Fisheries And Wildlife—Increase of $16.10 million

This wild spending growth explains why Mills has decided that she can’t possibly balance the budget without raising taxes, which she absolutely does in this budget, despite her insistence that she avoids “broad-based” tax hikes.

Indeed, Mills hits just about every “targeted” revenue mechanism that she can find:

• Cigarette Tax Increase: A $1.00 jump per pack, which is among the most regressive taxes you can levy.

• Ambulance Provider and Pharmacy Assessments: New taxes disguised as “assessments” to capture more federal matching funds, all while effectively raising costs for essential services.

• Digital Streaming Tax: The perennial push to tax Netflix, Hulu, and other streaming services, which is basically a digital consumption tax hammered out of leftover illusions of “fairness.”

• Fee Increases: Whether it’s for arborists, fishing licenses, or concealed handgun permits, Mills is leaving no stone unturned to find that extra buck.

Some of those proposals, like soaking tobacco users, are naked cash grabs masquerading as prudent public health policy. Notice that Mills did not propose this type of thing when the state was flush with cash, she only decided to do it when she needed to pull a bit more blood from the stone. Most of the people who will be affected by these types of hikes are low-income or middle-income Mainers.

The Disingenuous Pitch

Back to spending for a moment, did it surprise you to learn that the Department of Health and Human Services budget had grown from $3.71 billion all the way to $4.28 billion? I’ll admit, it surprised the hell out of me.

In her new release announcing the new budget, Mills stated that she would be “making targeted programmatic reductions to certain programs within the Department of Health and Human Services” and that there would be “programmatic changes within the Department of Health and Human Services to save costs.”

This, of course, heavily implied that spending within DHHS would be controlled in some way. The typical laymen would likely assume the DHHS budget was actually going down, not up. But it isn’t going down, it is ballooning by roughly $500 million dollars.

This is all part of the usual sleight of hand of government bureaucrats, who use intentionally misleading language to lie to constituents about what they are doing. In this case, she is pretending that this is a bare bones budget in order to justify the aforementioned tax hikes.

Along the way, Mills has enjoyed playing a fictional character: the sensible, prudent truth-sayer warning of other people’s irresponsibility.

Mills insists that she has always been warning everyone else to be frugal, but it was they who didn’t listen to her. She claims the Legislature is at fault for tacking on extra spending measures. She pretends that she alone tried to hold the line.

If it wasn’t so insulting, it would be amusing.

The facts speak for themselves, though. We have a half-billion-dollar shortfall, a near-immediate $118 million hole in MaineCare, and an unheard-of level of spending growth, all financed with an obscene laundry list of new taxes, fees, and “targeted revenue enhancements.”

That all falls on Mills.

This fiasco is more than a minor, temporary problem. Rather, it is a reflection of a deep-rooted problem in Augusta. We have a governor who sees budget expansions as a personal legacy item, and refuses to grapple with the harsh truth that Maine is sliding toward insolvency, and Maine families in every corner of the state are being squeezed to try to make up for the reckless, irrational mismanagement of the state’s finances.

We arrived here because Gov. Janet Mills lacks the political will and the fiscal sense to say “no” to anything.

The Path Forward

Every lawmaker—Republican, Democrat, or independent—who considers themselves fiscally prudent needs to unify and say “no” to this unmitigated disaster of a budget. Mills wants them to buy into her illusions that these so-called “targeted revenues” are both necessary and painless, and that there are no alternatives. She’ll paint doomsday scenarios and will claim that lawmakers need to make “hard decisions” to close budget gaps of her own creation.

But it is well past time to put a stop to this.

This state is at a crossroads. We can either let Mills ram through yet another majority budget, pass a minor patchwork supplemental, slap a new coat of paint on a crumbling edifice, and pretend all is well until the next crisis arrives—and it will arrive, mark my words—or we can use this moment to stand up, fight back, and demand real reform.

We should start by reversing expansions in MaineCare, especially for childless, able-bodied adults. We should reimpose stricter eligibility requirements and reintroduce common-sense welfare reforms that force able-bodied recipients to seek work. We should also slash many of the questionable “pilot programs” that keep cropping up in the Department of Health and Human Services, programs that were never properly funded and never proven useful.

On top of that, it’s time to restore discipline in K-12 funding. Do we genuinely need to keep setting new record highs for education funding year after year while the number of children enrolled in our schools drops and our test scores stagnate?

There is so much more that can be done. But more than anything else, we need a commitment to wrest control of the budget away from Mills.

If Maine lawmakers truly want to serve their constituents—if they want to lay claim to being “fiscally prudent”—they have no choice but to slam the brakes on this reckless plan. Let Mills and her surrogates howl about the “shocking cuts” or “draconian measures.” We either put our fiscal house in order now or guarantee a far worse mess down the line.

This is not a time for half measures. We need fundamental reforms and a willingness to say “no” to the incessant demands for more spending. That can only happen if lawmakers stop genuflecting to Mills, and letting her bulldoze them. Republicans should firmly refuse to even negotiate on these terms and stand for two principles above all else: no tax increases and no money from the rainy day fund.

Democrats should recognize the insanity of this document and politely reject the proposal, instead working together with Republicans to craft something more rational.

Will enough legislators from both parties develop a backbone this time around? I have my doubts. But I do know it is what needs to happen.

If it doesn’t, every structural gap will get bigger, every budget will become harder, and it will make the job of the next governor—no matter what party they belong to—gruesome to endure.