The two-year budget was ‘not the last word.' Here's what comes next.

Yahoo

31-03-2025

Senate President Mattie Daughtry looks on as Minority Leader Trey Stewart and Majority Leader Teresa Pierce converse before tabling the supplemental budget proposal on March 4, 2025. (Photo by Emma Davis/ Maine Morning Star)
The Legislature passed a two-year budget that everyone agrees doesn't work on its own.
Democrats pushed through this plan without Republican support after Senate Republicans refused to support a change package for the current fiscal year to address the immediate MaineCare funding deficit unless it included structural reform to the program.
The majority party argues a stopgap two-year budget was needed to 'keep the lights on' and provide consistency to Mainers amid federal uncertainty, but that it was only 'part one.' The budget leaves some things unfunded, notably another expected shortfall for MaineCare, the state's Medicaid program. Democrats say that was an intentional decision to wait for updated state revenue projections and any changes coming from Washington D.C.
Republicans argue, because of that, the budget isn't balanced and also doesn't include any of the policy changes Democrats may be looking to adopt in a 'part two' budget — a framework they disavow as disingenuous.
Some from the minority party have started collecting signatures for a People's Veto of the budget that passed, which, if they secure at least 67,682 signatures from Maine voters by June 18, would put the law on hold until the November election or an earlier statewide special election — causing a government shutdown.
'It's reckless. It's chaotic. It's what we're seeing in Washington, D.C., brought here to Maine,' Speaker of the House Ryan Fecteau (D-Bidderford) said of the People's Veto.
Political jabs aside, how are legislators honestly thinking about re-evaluating spending in light of the projected $450 million deficit over the next two years?
That budget bill was 'not the last word,' Senate President Mattie Daughtry (D-Brunswick) said.
'We need to start having the conversations about what the 132nd Maine Legislature wants,' Daughtry said.
'March majority madness': Legislative Democrats pass two-year budget over Republican objections
Minority Leader Trey Stewart (R-Aroostook) said his primary concern for the remainder of session is MaineCare.
'It's not fixed,' Stewart said. 'We are highly likely to be right back in here within a year dealing with yet another Medicaid bailout, to say nothing of what happens on the federal front.'
Republicans argue there is no money left for more work this session. Democrats argue that's not true. There's validity to both claims, depending on how you view the situation.
The state is expected to bring in $11,224,416,665 in revenue over the next biennium, fiscal years 2026 and 2027, based on the latest forecast from December.
While the general fund appropriations in the budget that passed last week total $11,320,717,493 for that timeframe, the total net impact is actually a bit less, $11,229,531,053.
Factoring in these new appropriations, remaining balances carried over and transfers, Christopher Nolan, director of the nonpartisan Office of Fiscal and Program Review, said fiscal year 2027 is expected to end with $127,737,632.
This is what's left for lawmakers to still appropriate in a 'part two' budget or through individual bill spending.
However, funding the expected Medicaid gap in 2027 would absorb most of it. The tax increases and program cuts Gov. Janet Mills proposed will be considered in the next budget, which could free up more dollars for new initiatives.
Uncertainty on the federal level adds another layer of complications to the funding landscape. On the state-level, the latest fiscal briefing from the Office of Fiscal and Program Review released last week shows general fund revenue is currently $28 million below budget. Much could change before the updated revenue forecast in May.
There's also another strategy lawmakers have expressed interest in exploring that could alter how much money they have to work with: resetting baseline spending, which the recently passed budget continued as is.
Regardless, there is apprehension about fiscal possibilities, as underscored by Rep. Amanda Collamore (R-Pittsfield) on the House floor last week.
'What is the point of working any bill with a fiscal note that isn't negative?' Collamore asked. 'I'm not sure it's responsible to vote for any bill, including my own.'
The process will, and should still play out, Stewart said.
'We don't know what we don't know until we get there,' he said.
In any session, regardless of the economic landscape, the budget process is murky with many bills dying by way of the 'appropriations table,' which all legislation with a fiscal note ends up on even after passing the House and Senate.
Last session, less than 10% of bills on the table became law.
The final arbiters are the legislators who sit on the Appropriations and Financial Affairs Committee, and the behind-the-scenes negotiating that determines their votes, along with the governor's veto pen.
Daughtry and Fecteau both said they believe what comes next shouldn't actually be up to them.
'I recognize as a leader I have a larger bully pulpit than the average members but I have trust in my colleagues not only on the policy committees but also on the Appropriations Committee,' Daughtry said. 'I really am trying to keep my palate dry and wait and see what my colleagues are able to come up with, what our members of the public say as well.'
While acknowledging that the Legislature has a balancing act ahead of it, Fecteau agreed.
'I'm not going to sit here and say I can identify all of the ways in which we can save money from the baseline or we can save money from not moving forward new initiatives that were proposed or how we can generate revenue in the most effective way,' Fecteau said. 'But what I can say is it will all be on the table and up for consideration amongst my colleagues on the Appropriations Committee. That's their charge.'
Stewart often repeats his stance that the state has a spending problem, not a revenue problem. Before the start of the session, he told Maine Morning Star he wanted the Legislature to audit the state budget to assess whether current funding levels are adequate.
So what do lawmakers want to reassess? 'It's all the above,' Stewart said. 'You've got to start peeling back the layers of the onion.'
Vacancies
There's the assumption, and historic reality, that the governor will get most of what she asks for, which includes a plan for approximately 250 more government positions. Stewart wants to see the state address vacancies first.
As of Feb. 13, there were 1,975 vacancies out of 13,557 permanent positions, amounting to a 14.6% vacancy rate, according to the Maine Department of Administrative and Financial Affairs. For comparison, the vacancy rate in February 2024 was 16.6% and in March 2023 was 16.2%.
DAFS Director of Communications Sharon Huntley said there are many reasons positions are vacant, and sometimes it's intentional, such as with seasonal positions, which make up 10% of the current vacancies.
'It's also important to note that eliminating a position will not necessarily save money,' Huntley said. 'Of the 1,975 permanent vacancies, nearly half don't include any general fund funding. For example, positions that are in place to use on as-needed basis funded with non-general fund dollars. While vacant they don't cost the state or the fund anything, and, similarly, eliminating them won't save anything.'
Additionally, each biennial budget includes savings from attrition — the assumption that there will be gradual staff reductions due to employees leaving and not being replaced. The two-year budget that passed included a 5% attrition rate level, up from 1.6%, which means the state has to have some level of vacancy in positions that are funded with general funds to achieve this budgeted savings.
Aside from a focus on vacancies, Stewart questioned, 'what's the vision?'
Pointing to Maine students' low test scores, inadequate mental health supports — a key point of contention in budget debates last year — and closing hospitals, which had already been struggling financially with high operating costs and low reimbursement rates before the supplemental budget scuffle, Stewart said reforming systems is what's needed.
In Stewart's view, that's namely MaineCare.
Health care
Legislative Republicans already presented proposals for reforming the program during supplemental budget negotiations, which Stewart said they'll continue to push. These include requesting waivers from the U.S. Centers for Medicare and Medicaid Services to mandate reductions in enrollment, as well as institute work requirements for able-bodied, childless adults.
The mandated reduction could start with a full review of everyone on the program to eliminate people who no longer qualify, Stewart said. What exactly work requirements would look like, he doesn't know. The Trump administration may make such changes on the federal level, though he doesn't see that as a reason to avoid doing it on the state-level first.
Daughtry said she's willing to discuss MaineCare reform.
'If we're having provider fraud or someone taking advantage of the system, I'm willing to hear those ideas,' Daughtry said, 'but when you're penalizing people whose very lives depend on the health care, that's not promoting the economy. That's going after people in need.'
Approximately 30% of Mainers and roughly half of all Maine children are covered by MaineCare. 'I really do feel healthcare is a human right,' Daughtry said. She also said it's the will of the people, who have twice approved expansions to MaineCare at the ballot box.
If we're having provider fraud or someone taking advantage of the system, I'm willing to hear those ideas, but when you're penalizing people whose very lives depend on the health care, that's not promoting the economy. That's going after people in need.
– Senate President Mattie Daughtry
Fecteau said he'd entertain the reforms left on the table by Senate Republicans rejecting the supplemental deal, specifically restrictions to ensure that people who win the lottery or who are incarcerated don't remain eligible for MaineCare.
While Fecteau said the two-year budget could have fully funded MaineCare through 2027, the decision not to was an effort to say 'let's have an open and earnest conversation around potential reforms.'
Senate Minority Leader Matthew Harrington (R-York) explained in a press conference last week that the minority party's ultimate goal is to shift people currently on MaineCare to federal exchanges.
Maine is one of 19 states, and Washington D.C., that fully run their own health insurance marketplace, called CoverME.gov.
Last month, nearly 65,000 Mainers signed up for affordable health coverage through CoverME.gov for 2025, according to Health and Human Services Commissioner Sara Gagné-Holmes. However, Maine's Office of Health Insurance Marketplace is the smallest in the nation and the office is requesting more positions in this next budget to keep up with growing enrollment.
For people who are working, Harrington argued, 'These folks can afford to pay something for health insurance. We should be encouraging them to do so.'
Daughtry said such a claim misunderstands how the marketplace works, as people are not able to enroll if their income threshold is below the bar that qualifies them for MaineCare.
'It's ensuring that folks are able to find a product that meets with their income guidelines,' Daughtry said. 'Now, if we could actually have the real conversation behind driving more people to the marketplace, it's making sure people have more money in their pockets.'
Daughtry hopes the Legislature considers bills that seek to establish a living wage, particularly addressing underpay in the public sector, as well as proposals to help families, such as better supporting childcare.
Harrington and Stewart also argued that high MaineCare enrollment hurts hospitals, as they only receive a 70% reimbursement through the program compared to higher private-payer reimbursements.
Daughtry argued the state should increase MaineCare reimbursements. However, she added that private insurance is also not reimbursing people enough.
'It's not just MaineCare,' Daughtry said. 'The health care system as a whole is broken.'
Taxes and cuts
Given the $450 million deficit the state is facing over the next biennium, and that only $127 million remains for the second year, program cuts and taxes are being considered, including the slate of changes Mills proposed that were not included in the 'part one' budget.
Progressives are not supportive of her plan to cut some programs, including childcare workers stipends, and Republicans have already drawn a line in the sand regarding tax increases of any kind.
While Mills has suggested a number of largely regressive taxes, which have a greater impact on low earners, some Democratic legislators are alternatively pushing for a model that taxes the wealthy more, including a 'millionaire tax,' similar to a law recently passed in Massachusetts to tax income over $1 million by an additional 4%.
One of Fecteau's proposals, LD 1082, is to increase the real estate transfer tax on home sales above $1 million to increase the resources the state commits to the construction of affordable housing. Other lawmakers have proposed taxes on short-term rentals or changing the timeframe for accessing Historic Property Rehabilitation Tax Credits to fund things like affordable housing and education without adding to state spending.
Albeit in different ways, there's consensus that systems need to change.
Stewart said of Democrats, 'They want to be all things to all people all the time,' intentionally or not, calling back to the phrase Mills repeated when she first introduced her budget plan in January.
'I don't think government can, or should, be all things to all people at all times,' Mills said in defense of her proposed cuts and tax increases.
Ultimately, as Fecteau put it, 'It's going to be a balancing act.'
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