Politics
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Gov. Janet Mills on Friday unveiled a two-year budget plan that includes a tobacco tax increase and cuts to Department of Health and Human Services programs as she continues to warn lawmakers of flattening revenue and an expected budget gap through 2027.
The highlight of the roughly $11.6 billion proposal that the Democratic governor outlined but had not fully published Friday afternoon is a $1 per pack increase in Maine’s cigarette tax, bringing it to $3 alongside a commensurate increase to the tax on other tobacco products. Those changes would generate about $80 million over two years, the governor’s office said Friday.
It is the last and most difficult budget season of the governor’s six-year tenure. A revised December forecast from a state commission projected a spending gap of $450 million for lawmakers to close through 2027. Lawmakers will also debate closing a $118 million Medicaid shortfall and a $280 million transportation budget gap over the two-year budget cycle.
Alongside the tobacco tax increase and the use of updated revenue projections, Mills said Friday she is proposing “targeted” reductions to various health programs to close the budget gap. The governor’s office said those reductions include tightening eligibility for low-income food assistance programs and suspending the creation of two “crisis receiving centers” planned for Kennebec and Aroostook counties after last year’s Lewiston mass shooting.
“This was a difficult budget to put together,” Mills said in a statement. “Our economy is strong, but our revenues are leveling-off, and while prior legislatures have made many important and worthwhile investments, we have to consider what we can sustain in this budget cycle.”
Mills is termed out after 2026 and working with a Legislature this session that has narrower Democratic majorities in each chamber after Republicans picked up seats in November.
She has repeatedly clashed with her party over spending and refused to sign dozens of bills on the final day of the last session by arguing they would push the budget to the “breaking point.” Republicans have acknowledged the warnings from Mills while blaming both her and her party passing the last few state budgets without their support.
They are unlikely to get behind any tax increase. Democrats from more rural districts could be an obstacle to targeting the tobacco tax that brings in more than $150 million per year. A small number of them banded with Republicans to block flavored tobacco bans in recent years.
The tax falls hardest on low-income residents, according to the conservative Tax Foundation. But public health groups have argued for raising the tax because it is the second-lowest in New England despite Maine having a higher-than-average cancer rate among states.
Finance Commissioner Kirsten Figueroa also sent legislative leaders and budget committee members a memo Tuesday that informed them of the MaineCare funding gap. Mills proposed Friday a $122 million annual investment to stabilize the state’s Medicaid program.
Figueroa said the MaineCare shortfall results from enrollment growth, an increase in the use of its services after the COVID-19 pandemic and overall cost increases. A majority of states are facing Medicaid funding issues due to increased costs and less money coming into state coffers while federal funding declined from pandemic highs.
Former Gov. Paul LePage, a Republican, resisted expanding MaineCare under the Affordable Care Act due to cost concerns, even after voters mandated it in 2017. Mills replaced him in 2018 after pledging to implement expansion, which she did in the first days of her tenure.
Ahead of Friday, Mills and top lawmakers from both parties unveiled a storm resilience package in the wake of destructive winds and flooding in recent years. The proposal does not yet have a cost estimate but would give grants of up to $15,000 for homeowners to mitigate damage from severe weather and direct existing funds to bolster emergency management resources.
Mills has also said she will propose turning her energy office into a Cabinet-level Maine Department of Energy Resources with a Maine Senate-approved commissioner.
