Maine State Capitol, photo by Ramona du Houx

By Ramona du Houx

Maine faces an estimated $1.2 billion revenue shortfall in the next fiscal year that puts many families at risk, according to a new report published in June by the Maine Center for Economic Policy (MCEP).

The state will see a 30 percent revenue decline in the fiscal year ending June 30, 2021, with income and sales tax revenues falling dramatically as a result of the unprecedented economic slowdown caused by the coronavirus.

“The swift and deep COVID-19 related recession will be one for the record books,” said state finance commissioner Kirsten Figueroa.

Maine is likely to face further losses in subsequent years, as state revenue shortfalls nationwide are projected to total $650 billion by the end of fiscal year 2022.

Only Congress has the borrowing power to stabilize state and local budgets on the brink of an unprecedented collapse.

To climb out of the recession caused by the financial collapse of 2008 President Barack Obama pushed through a stimulus package when he took office in 2009. Maine’s Senators, Olympia Snowe and Susan Collins were the only two Republicans to vote for the package that injected millions into grants for state and local governments across America. Maine would not have climbed its way out of that near depression if there hadn’t have been the American Recovery and Reinvestment Act (ARRA) of 2009.

The ARRA provided grants for infrastructure projects, clean energy initiatives like Maine’s offshore wind project and solar, amongst community block grants, and healthcare funds. Innovation for new technologies here in Maine got a boost from ARRA funding. We need a stimulus that is even greater now.

COVID-19 has created a recession that is verging on a depression across America.

The MECEP called on Congress to include substantial relief for state and local governments in the next round of coronavirus response legislation.

“If left unaddressed, the unprecedented shortfall will force the state to make painful cuts that will hurt Maine families and make the recession worse — including widespread layoffs, cuts to education and health care, and reductions in state services and investments when they are needed most,” said Sarah Austin, a MECEP policy analyst and the report’s author. “Congress must meet the severity of this fiscal crisis with substantial relief to protect families and state governments facing economic catastrophe.”

State spending is a crucial element of the state economy, and a powerful tool for reducing the harm of this recession and hastening the recovery. More than one in six Maine workers is a public-sector employee. Without substantial federal aid, a revenue cut of this magnitude could cause mass layoffs throughout the state, making the economic challenges even worse.

Maine had a substantial Rainy-Day Fund before COVID-19. Now the state is looking at red and the future doesn’t look good.

Medicaid enrollment is expected to spike after nearly 48,000 Mainers lost their employer-sponsored health insurance as the result of a layoff since the pandemic began.

The state will face new education costs with ensuring equity and catching students up after months of distance learning, and establishing new systems and procedures to keep students, teachers, and staff safe when schools re-open.

Market volatility during the coronavirus recession will likely spur losses in the state pension system. In the next budget, legislators will likely need to increase funding to ensure Maine seniors get what they have earned in their retirement years.

“Maine is not unique in the fiscal crisis it faces. Across the nation, states are staring down a $650 billion revenue shortfall because of COVID-19,” said MECEP executive director Garrett Martin. “The current downturn is unlike anything we have ever seen. State governments are on the frontlines of the pandemic and will play a crucial role in the economic recovery. We urge Maine’s congressional delegation to meet the moment by supporting bipartisan legislation to provide fiscal relief for state governments in the next round of relief legislation.”