Gov. Janet Mills unveiled a budgetary change package on Wednesday that includes substantial funding proposals that would help the state build new affordable housing, help parents afford child care, and help businesses train new workers.
But the Democratic governor is at the same time calling for new business tax cuts that critics say are unproven and could over time drain money from other important priorities.
The governor’s change package is an amendment to her initial $10.3 billion spending proposal for the 2024-2025 biennium outlined earlier this year. It builds upon the remaining budget initiatives that were not included in the “continuing services” budget passed by the legislature in March. That baseline budget, passed along party lines to avoid a potential government shutdown this summer due to Republican obstruction, only covered the state’s existing spending obligations.
The change package would be funded by a projected $223 million surplus in state revenue for the current biennium.
“This proposal lives within our means, using revenues in a responsible way to address serious, pressing issues,” like the housing crunch, homelessness, and food insecurity “while also making thoughtful, strategic investments that will strengthen our economy and make Maine a better place to live in the long-run,” Mills said.
The process now swings to the legislature where lawmakers will attempt to balance the governor’s demands with their own spending priorities in a supplemental budget they intend to pass this summer. While Mills’ proposal contains several progressive priorities, it neglects others, such as funding for rental assistance, immigrant inclusion in healthcare, start-up costs for a paid family and medical leave program, or money to expand the state’s child tax credit.
Over $90 million for housing and services for the unhoused
The governor’s change package adds $50 million to her original proposal of $30 million to build new affordable housing. The housing units would be constructed through the state’s existing private-public development partnerships — the Rural Affordable Rental Housing Program and the federal Low-Income Housing Credit Program — whereby the state issues tax subsidies or forgivable loans to entice developers to build affordable units or refurbish old buildings.
The increase will likely be better received by housing advocates who earlier this year said Mills’ initial $30 million proposal was far too small and would only build, according to some estimates, an additional 250 housing units per year. There is a shortage of about 20,000 affordable housing units in the state.
In addition to new construction, Mills is proposing an additional $12 million in one-time funding for the Emergency Housing Relief Fund created in 2022 to help cities and towns provide shelter and services to Maine’s growing unhoused population.
The proposal also includes funding for technical assistance for developing “housing first” properties and services for chronically unhoused residents, which would be administered by MaineHousing, the state’s housing authority.
Mills’ change package would also allocate $4 million in ongoing funding to expand a tax credit that helps families pay for child care. The funding would double the state’s Credit for Child Care Expenses from 25% to 50% of the federal credit for child care expenses.
The expanded tax credit would help address one side of a deepening crisis in the state’s care economy. As Beacon previously reported, early childhood educators, child welfare caseworkers and direct care workers are being driven out of their fields by low salaries, while daycare providers can’t raise wages without shifting that cost onto struggling families. Some legislators will likely push to include subsidized pay raises for care workers in the supplemental budget.
Labor and progressive groups will likely welcome the inclusion of several priorities in the governor’s change package, including $19.8 million to give retired state employees a one-time 3% cost-of-living adjustment, $2.3 million in ongoing funding for the Maine Apprenticeship Program, a $12 million investment in developing deep-water ports for wind turbine construction, and $4.9 million in ongoing funds for children’s behavioral health services.
Yet another business tax giveaway
Mills has also proposed several budget items that businesses will likely applaud. Addressing the state’s aging workforce and the need to retain and attract younger workers to Maine, her plan calls for $5 million in one-time funding for a pilot program aimed at drawing recent college graduates to the workforce.
But perhaps the biggest boon for businesses will be through a plan to create new tax giveaways they hope will incentivize economic development in rural Maine.
Mills has proposed $4.6 million in ongoing funding to establish the Dirigo Business Incentive, a tax program sponsored by Senate President Troy Jackson (D-Aroostook) that offers businesses a tax credit of $2,000 for each worker trained in an approved program, as well as up to a 15% credit for capital investments in rural counties, with a 7.5% credit for York, Cumberland, and Sagadahoc counties.
The $4.6 million appears to be only part of the funding for the Dirigo Business Incentive, as a representative for the Maine Department of Economic and Community Development told the Bangor Daily News that the program would cost $54.5 million in 2025, its first full year of implementation.
Economists underscore that that cost would be borne by Maine taxpayers. Maura Pillsbury, a state and local tax analyst with the Maine Center for Economic Policy (MECEP), explained in a recent policy brief that similar business tax giveaways — such as the Pine Tree Development Zone program created in 2003 and due to lapse at the end of this year — cost Maine billions of dollars each year. She said that numerous assessments by state auditors over the years have failed to find a clear benefit of such tax incentives, noting that they divert money away from other important priorities.
“Maine has hundreds of tax giveaway programs that cost the state money — but you won’t find them listed individually in the state budget although they reduce the amount of money available to the state to fund other important priorities like infrastructure, education, and healthcare,” Pillsbury wrote.
Reacting to the governor’s proposal, MECEP president and CEO Garrett Martin applauded the inclusion of funds to “address the urgent problems facing our state, including housing and energy costs.”
However, he voiced concern over the new corporate subsidy, which he said “would balloon in cost in future years.”
“Research shows these programs are often poorly targeted to achieve intended outcomes and take resources away from schools, roads and communities,” Garrett said. “We hope the legislature will also consider including important policies not mentioned by the governor’s package including expansion of Maine’s version of the child tax credit, significant investments in child care affordability and start-up costs for Paid Family Medical Leave.”