September 17, 2020

Order addresses projected revenue shortfall while avoiding deep programmatic cuts & layoffs and preserving critical public health, safety, and education funding for now

Governor Janet Mills today signed a curtailment order to maintain budget stability amid a projected revenue shortfall caused by the COVID-19 pandemic. The Executive Order, which adopts recommendations from the Department of Administrative and Financial Services, curtails allotments to the State’s General Fund by $221,775,584 and to the Highway Fund by $23,000,822.

The order avoids deep programmatic cuts, thereby protecting Maine’s safety net infrastructure and preserving critical public health, public safety and education funding that Maine people rely on. It also avoids layoffs of State personnel and leaves intact Maine’s Budget Stabilization Fund, also known as the “Rainy Day Fund”, the balance of which stands at $258.9 million, an increase of more than $50 million under Governor Mills.

“While every state in the nation is facing significant challenges as a result of COVID-19, our actions today will ensure Maine’s fiscal stability in the short term and prevent significant impacts to the services that Maine people rely on,” said Governor Mills. “I urge Congress and the Administration in Washington to act immediately to provide additional aid to state and local governments so that we can continue to preserve critical services for Maine people and chart a full economic recovery.”

In July, the non-partisan Revenue Forecasting Committee projected that the State of Maine would face a $528 million revenue shortfall in the General Fund for the biennium ending June 30, 2021 as a result of the COVID-19 pandemic. Prior to the release of that report, Governor Mills worked with the Legislature in a bipartisan manner to pass a supplemental budget and related legislation that set aside more than $106 million in the General Fund.

To fill the remaining $422 million shortfall in the General Fund, the Governor directed the Department of Administrative and Financial Services (DAFS) to find solutions that minimize the impact on critical programs, such as GPA for education and critical State government personnel. DAFS presented its recommendations last week, which the Governor adopted today.

More specifically, the curtailment order:

• Replaces approximately $97 million in State spending with one-time Federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act Coronavirus Relief Funds for authorized public health and safety costs in line with updated guidance from the U.S. Treasury Department;
• Adopts approximately $125 million in departmental cost savings and efficiencies. These departmental cost savings include funds from CARES Act’s higher Medicaid federal reimbursement rates (“FMAP”); federal grants awarded for departmental functions; and managing expenses by freezing many vacant positions; delayed technology updates; reduced spending on contracts; and cancelling conferences, projects and related travel.

In January 2021, also as part of the plan to balance the budget, the Governor will propose for Legislative approval an additional $130 million in General Fund departmental efficiencies utilizing improved FMAP and transferred appropriations from the FY20 General Fund. These transferred appropriations went unspent thanks, in part, to Governor Mills’ mandate to her Cabinet, at the outset of the pandemic, that State government adopt frugality measures, which include the same style of freezes, delays and cancelations.

Similarly, the Governor will request $70 million in proceeds generated by the State liquor operation to be moved from the Maine Municipal Bond Bank to the General Fund, including $50 million deposited in past years and $20 million anticipated in FY21.

Also included in Governor Mills’ curtailment is approximately $23 million in savings to address the shortfall in the Highway Fund. An additional $17 million of Highway Fund savings will be available upon Legislative approval.

A curtailment order is a mechanism Maine governors can use to balance upended budgets when the State Legislature is adjourned. The previous four governors have issued curtailments. The $244,776,406 in total curtailment ordered by Governor Mills goes into effect today and will be made on a quarterly basis through the end of the fiscal year on June 30, 2021.

“As all States across the nation struggle with the drastic consequences of COVID-19, this Administration’s proactive fiscal management and willingness to attract and leverage federal resources has made all the difference in preserving solvency for the State’s most important functions and supporting the state’s economy. Governor Mills’ curtailment order addresses the shortfall as we know it today and ensures the continuity of crucial services for Maine residents during these unprecedented times,” said DAFS Commissioner Kirsten Figueroa. “As we look ahead to the next biennium, we will continue to closely monitor revenue receipts, updated forecasting, and the availability of federal funds, which will be even more crucial in FY22 and FY23 if we are to avoid significant programmatic changes.”

Through the National Governors Association, Governor Mills has joined her Republican and Democratic counterparts across the country to advocate for additional funding for State and local governments.

A copy of the Governor’s Executive (PDF) and Financial Orders (PDF) are attached.