This week Governor Mills signed the “part two budget” that makes historic investments — establishing a paid family and medical leave program for Maine, committing over $100 million in housing affordability and emergency shelter, supporting child care workers and increasing supports for parents to better afford child care, and overhauling property tax programs for older Mainers to make sure money is reaching people who need help.
These investments build off a continuing services budget passed a few months ago that funded baseline services for Maine communities — things like funding the state’s share of public education and local services, free school meals, and the homestead exemption so that towns had a stronger sense of resources coming in before they put their budgets on the spring ballot. It also continued to fund higher wage rates for behavioral health workers and child care wage supplements that were implemented in recent years and have been critical to stemming worker shortages in these fields.
All told, these two budgets represent $10.3 billion in state resources and hundreds of millions more in federal dollars flowing through Maine communities. This is what good economic development looks like — investments that bet on people and help us all thrive.
While this budget does great things, there are a few provisions Maine Center for Economic Policy finds concerning. Below we highlight where the budget delivers for Maine workers, families, and communities and where future improvements could be made.
Cause for celebration
Paid Family and Medical Leave
A statewide Paid Family and Medical Leave program will be accessible to all workers and allow up to 12 weeks of paid leave per year for qualified reasons. The program is funded by a 1 percent payroll tax split between employees and large employers to allow people taking leave to receive a weekly benefit from the state fund equal to a portion of their earnings up to the state’s average weekly wage. An estimated 600,000 workers, 90 percent of the workforce, are eligible to benefit from the state program.
Dependent Exemption Tax Credit
Parents with the lowest income will have access to Maine’s $300 per dependent tax credit — Maine’s version of the child tax credit. Under existing rules, the credit has a minimum income requirement, meaning families with low income lose some or all the value of the credit simply because their income is too low. Now, the credit will be refundable, meaning families with low income and low or no income tax liability will benefit. Families with low income will receive the full $300 credit per child starting in tax year 2024 which can be filed for in spring of 2025. About a third of Maine children, (73,000) live in households with incomes that will be boosted by this change. This credit —and potential increases to it in the future — has the power to reduce child poverty and improve financial outcomes and general wellbeing throughout recipients’ lives.
Property tax changes
The ill-conceived property tax freeze for Mainers 65 and older will be repealed and the funds repurposed for two property tax programs that help older Mainers with low and middle income afford their property tax bills. Rather than subsidizing the property taxes of seaside estates, the budget instead directs $45 million to increasing the property tax fairness credit and expanding eligibility for the property tax deferral program, initiatives that are better suited to help older Mainers who are currently struggling to afford their property taxes.
- Starting in tax year 2024, the maximum property tax fairness credit for Mainers 65 and older will increase from $1,500 to $2,000 and the credit will be refundable.
- The property tax deferral program allows property owners who have disabilities or are 65 and older to defer property taxes until they die or their property is sold. The budget expands eligibility to homeowners who are already behind on their property taxes by up to 18 months — prior eligibility required owners to be up to date on payments — and it increases income limits from $40,000 to $80,000 and asset limits from $50,000 to $100,000.
$60 million will go toward improved access to child care for families with low income and improved wages for child care providers. Monthly wage supplements for child care providers will be doubled from $200 to $400 a month. Families with income below 185 percent of the federal poverty level (a little over $55,000 for a family of four) will be eligible for head start programs. Families with earnings up to 125 percent of the state’s median income (around $124,000 for a family of four) will be eligible for subsidies to help with costs of child care. Finally, the budget requires the Department of Health and Human Services to create a plan for a widespread child care subsidy program which will cap costs at 7 percent of a family’s income for most families by 2030.
Free community college
The budget continues free community college for high school graduates and people obtaining high school equivalencies for the 2024 and 2025 school years which will reduce student debt loads, increase future earnings, and improve Maine’s workforce. The program requires students to first accept all grants and scholarships for which they are eligible, and the state covers the balance. This helps to contain costs and maximize federal funds while also ensuring tuition is fully covered for eligible students.
An additional $1.5 million will be allotted to adult education, which plays an important role in workforce development by helping adults earn high school equivalencies, prepare for higher education, and improve English fluency. Additionally, a working group will be established to determine whether current adult education funding is meeting the needs of Maine communities, is comparable to K-12 funding rates, and communities are properly incentivized to use local funds to bolster adult education offerings.
Constructing housing units
Addressing one of the most pressing issues facing Mainers, $70 million will be committed to building affordable housing, allowing up to $35 million to be used for the rural affordable rental housing program and the remainder to be used for the low-income housing tax credit. These programs subsidize the construction of housing that will be affordable for households with low income. MECEP estimates this funding will help build more than 200 units of affordable housing across the state.
A statewide Housing First program will provide unconditional housing for more than 1,000 people across the state experiencing chronic homelessness. This housing would be paired with “wraparound” supportive services to foster stability for these Mainers and help them find jobs and/or treatment for mental health conditions or substance use disorders. Housing First is the most promising model we have for eliminating chronic homelessness, with a survey of Housing First programs across the country finding they reduce chronic homelessness by 88 percent on average.
Emergency shelter funding
The budget provides $12 million for emergency shelter operations including shelter space, legal services, and other supports to help individuals access services and enter the workforce.
Medicare Savings Program
Cuts to the Medicare Savings Program put in place under the LePage administration will be reversed. This program — which helps older Mainers with low income afford their Medicare premiums, deductibles, and copayments — is expanded to reach more Mainers who need it by removing the asset limits and increasing income eligibility to 250 percent of the federal poverty level (about $34,000 for an individual, while the existing income limit is $21,000 for an individual). While expanding access to the Medicare Savings Program would help older Mainers with low income generally, this access is particularly important to Mainers who experienced economic discrimination throughout their careers, inhibiting their ability to save for retirement.
A Rural Recovery Fund will be established to develop and run new substance use recovery centers that allow families to be reunited in a treatment environment. Additionally, funding will be provided for a new 10-bed treatment facility located in either Kennebec or Washington county.
Investing in public workers
Staffing and funding will be provided to complete a compensation study to assess wage discrepancies between public employees and their counterparts in the public sector. This is an important step toward more fairly compensating the workers who keep our state and communities running. The budget also provides for a one-time, 3 percent cost of living payment of up to $725 to state retirees whose cost-of-living adjustment for this year was capped at only a third of inflation. However, because it is a one-time payment, the adjustment will not be added to the base for next year’s cost of living adjustment.
Where the budget falls short
While the list of great things in this budget is too long to list in this article, critical priorities are unaddressed:
- Most immigrant adults are still excluded from accessing MaineCare coverage to see a doctor.
- While investment in community college attendance is continued in this budget, similar support is not offered for students seeking university education. Appropriators removed an increase to the State of Maine Grant that the governor proposed in her initial budget and left out a legislative proposal that would have offered free tuition for university students with low income.
- While the investments in housing are historic, laudable, and badly needed, the budget excludes a proposal that would have reversed LePage era cuts to general assistance for towns, an important support system for families at risk of losing their housing or having their utilities shut off.
The budget also invests in two tax changes that are poorly targeted and come at a heavy cost. The new Dirigo business subsidy and the expansion of the pension exemption, once fully phased in, will cost about $80 million per year in state resources that could be better serving our communities, workforce, and local businesses in other ways.
Dirigo Business Incentive Program
The state’s ineffective Pine Tree Development Program will be replaced with a new Dirigo Business Incentive Program that repeats many of the structural failures of the Pine Tree program. The Dirigo program is estimated to cost around $40 million a year and will offer $2,000 per worker training tax credits for training as little as 20 hours, and refundable tax credits for capital investments equal to up to 10 percent of the investment costs. This untested program will continue the Pine Tree legacy of minimal transparency and unclear benchmarks for success, and the program lacks a sunset date for the legislature to actively assess how well the program is working and whether it should be continued.
Pension exemption increase
Starting in tax year 2024 the pension exemption increase replaces the $35,000 pension exemption with an exemption equal to the full retirement social security benefit, which will be around $45,000 in 2024. MECEP has noted how expansions to this exemption disproportionately benefit wealthy older people, and this change is no exception. Social security is already untaxed in Maine and the first $18,550 of taxable income is not taxed because of the standard deduction and personal exemption (the amount is doubled for married filers). Under this new law, an individual with the maximum $45,000 in social security benefits could have an additional $63,550 in pension income for a total of $108,550 in income — and pay zero dollars in state income taxes. While there is unfairness in the tax code due to state employee pensions being taxed, this and past efforts takes a blunt rather than surgical approach, exempting all types of pension income rather than focusing on state pensions that receive unfair taxed status relative to social security.
Conclusion: hats off to a modernized spending cap
This budget does amazing things! And most of the part two budget would not be possible if lawmakers had not modernized an antiquated and unnecessary spending cap to account for how state services have grown to offer greater benefits to Maine communities and the ways inflation has affected state resources. We applaud lawmakers and the governor for putting forward a solution to the state’s arbitrary cap on spending, without which most of this part two budget would have gone by the wayside. Thanks to this change and many hours of hard work by appropriators, we have a budget that lays a foundation for future prosperity and will make a real difference for kids, families, students, workers, older people, and communities across Maine.