Projected budget shortfall is a sign of Maine’s fiscal mismanagemen

By Matthew Gagnon

Sometimes, it’s no fun being right.

Two weeks ago, Maine’s Department of Administrative and Financial Services dropped a fiscal bombshell: a projected $949 million structural gap for the 2026-2027 biennial budget period. To interpret for you, that’s nearly $1 billion that the state isn’t projected to have but plans to spend anyway. And yet, the news barely caused a ripple in the media. The few who did report on it seemed all too eager to dismiss it as business as usual.

But it isn’t business as usual. This projected deficit is all too predictable and very much the result of reckless fiscal management in Augusta.  

For years, I’ve been sounding the alarm about the reckless spending spree in Augusta. The state’s unending appetite to burn through taxpayer dollars has been both unprecedented and unsustainable. We’ve been told not to worry, that Gov. Janet Mills was not spending indiscriminately but instead “saving money to preserve the state’s long-term fiscal health,” and that the state’s finances are just fine, thank you very much. 

But let’s peel back the curtain and look at the cold, hard facts.

Projected budget shortfalls aren’t new to Maine. Indeed, to be fair, they have been a fixture in our fiscal landscape for decades. Traditionally, they serve as a starting point for budget negotiations. But while projected shortfalls aren’t inherently abnormal, the size and scope (and trendlines) in this one are alarming.

Consider the tenure of Gov. John Baldacci. During the Great Recession, Maine faced a massive budget crisis that required significant cuts and austerity measures. Despite this, things were in freefall by the end of Baldacci’s time in office with the projected shortfall growing by roughly $654 million between the 2010-11 and 2012-13 bienniums alone. 

When Gov. Paul LePage came into office, that structural gap was more than $1.5 billion. LePage chose to make fiscal management one of his main focuses, and the massive structural gap began to fall year by year, ultimately getting down as low as $165 million at one point. This led the BDN to boldly declare in 2017 that, “thanks mostly to LePage, Maine has a record $1 billion in the bank.” That structural gap number was indeed higher than that when he left office, but the point is that limiting the gap and stabilizing the state’s fiscal picture was at one point a major priority, and the work paid off. 

Then came Mills and the Democratic Legislature. The very first thing they did after Mills took office in 2019 was to spend an unprecedented amount of money. Mills’ first budget, as I’ve repeatedly pointed out in the past, grew spending by roughly the same amount that LePage had grown spending in two full terms. 

It is no surprise, then, that under Mills we have seen increased shortfalls and wild fluctuations that make planning very difficult. Between the 2020-21 projections made under LePage and the 2022-23 projections, there was a sudden increase of nearly $300 million in the projected shortfall.

While the projections for the following two year period were slightly rosier due to the COVID backstop funding, the latest projections show a staggering $949 million structural gap for 2026-27, which represents an increase of $541 million over the course of a single budget cycle. 

If you look at what the state has done to its budgets, this isn’t surprising. Mills and her legislative allies engaged in a partisan exercise to engage in unrestrained spending, fueled by an overreliance on temporary federal stimulus funds.

Now, as those federal funds dry up, we’re left holding the bag. The state’s expenditures have ballooned, but the revenue to support them hasn’t kept pace — and won’t, unless, of course, the government decides to reach even deeper into your pockets.

But don’t expect the Mills administration to admit that six years of her leadership has left the state’s finances in shambles. She has paid lip service to fiscal discipline, while offering no real plans to substantially curb spending, and no proposals to reform bloated programs. The inflation-fueled explosion of cash experienced by nearly every state was eventually going to subside, and when it did, this grim situation was inevitable.  

The funny thing is, we’ve been here before. Not only did LePage have to spend two terms trying to get the state’s finances straightened out after the Baldacci years, but Baldacci himself was put in a similar position after eight years of Gov. Angus King’s overspending left the state vulnerable, resulting in a $1 billion budget hole that needed to be dealt with.

At what point will Maine voters start to recognize the irresponsible fiscal mismanagement as it is happening rather than at the end of the party when the music stops?

Gagnon of Yarmouth is the chief executive officer of the Maine Policy Institute, a free market policy think tank based in Portland. A Hampden native, he previously served as a senior strategist for the Republican Governors Association in Washington, D.C.