The best of the budget for Maine’s economy

The 130th legislative session began with a surplus of more than $800 million which was revised up to $1.2 billion in March. The bipartisan budget approved last week by the Legislature and governor allocates a portion of these resources for child care, health care, education, housing, and incomes of households with low and middle income. These investments in families, workers, and communities advance economic equality and lift all Maine people.

Child care

Extending wage supports that began in the pandemic using federal American Rescue Plan Act dollars, $12 million is being provided to supplement wages for child care workers across the state through the end of the year. This funding is accompanied by a study that authorizes the Department of Health and Human Services to report back to the legislature with a proposal for an ongoing wage supplement program to start in 2023 with increased support for workers with greater credentials. This would help incentivize continued education in the child care field, improve economic security for workers, and increase retention in this vital sector that supports the larger workforce.

Health care

Wages for the state’s direct care workforce are supported by increased funding for Medicaid reimbursement of direct care services to ensure workers receive a wage of at least $15.94 per hour this year to keep up with a wage requirement of 125 percent of the state minimum wage.

Important steps forward on health care for Maine’s children include:

  • The state’s Medicaid program for children has been expanded to include kids between 200 and 300 percent of the federal poverty level. An estimated 40,000 children would become eligible under this change; 6,000 of whom are currently uninsured and likely to switch to state coverage.
  • Premiums for children’s health insurance have been eliminated, benefitting the approximately 5,000 children already enrolled in the state health plan known as CubCare.
  • To support children’s oral health, preventative dental care will be provided in schools and capacity will be created at the Maine Center for Disease Control and Prevention to work on oral health.

Nearly $20 million in desperately needed funding will be infused into Maine’s behavioral health care system, supporting children’s residential care, assertive community treatment for adults with severe and persistent mental illness, targeted case management services, and outpatient therapy for children and adults. These initiatives will draw down an additional $17 million in federal funds, which, combined with state funds, will support behavioral health services in Maine, add capacity and minimize waitlists, and stabilize the workforce by increasing wages.

One important bill that will not be funded in this budget would extend MaineCare eligibility to adult immigrants. The LePage administration cut immigrants out of eligibility for the state’s MaineCare program. While the legislature approved eligibility for immigrant children and pregnant women last year, the work of restoring coverage for adult immigrants in this year’s budget did not continue. Numerous studies have found parental coverage is crucial for ensuring that eligible kids remain insured. Making adult immigrants eligible helps eliminate confusion over eligibility and will provide more Mainers with affordable health care. The Maine Center for Economic Policy urges the next legislature to restore MaineCare eligibility for adult immigrants.


Last year’s historic investment in Maine schools — which fully funded public education at the required 55 percent of education costs for the first time since voters set the benchmark in 2004 — will be continued for the coming school year with the allocation of additional funding. Support will also continue for a universal school meals program that provides two free meals a day to every public-school student in the state.

For Maine high school graduates and people earning high school equivalencies in 2020, 2021, or 2022, free tuition will be provided for fall enrollment this year and next at Maine community colleges. Now, more Mainers can enter the workforce without taking on debt.

For the tens of thousands of Mainers who have student loan debt, the state’s tax credit for student loan repayment has been reformed so it can be used by more people. The new policy effectively reimburses Maine student loan holders for up to $25,000 in student loan payments. Under the new simplified credit, student loan holders who graduated after 2007 are eligible for a refundable income tax credit that matches every dollar spent on student loan repayments during the year up to a maximum of $2,500. Filers are subject to a lifetime limit of $25,000 in credits.


To provide emergency housing, $22 million will be distributed by Maine Housing Authority to pay for short term housing, converting properties into housing, and supplementing other short term rental assistance programs for people experiencing homelessness. The fund can also be used to support housing for people with disabilities, mental health challenges, or substance use disorder who are experiencing homelessness.

Boosting incomes

Every income tax filer with income less than $100,000 for single filers, $150,000 for head of household filers, and $200,000 for married filers will get a $850 check. Married filers receive one payment per person, or $1,700. An estimated 858,000 Mainers are expected to benefit. To be eligible, Mainers must submit 2021 tax returns by October of this year and not be claimed as a dependent. To help more Mainers file in time, $100,000 will fund the CA$H Coalition free income tax filing service.

Incomes will be increased on an ongoing basis through boosted tax credits for working households with low incomes and people struggling with high property tax and rent costs. Both credits are available through filing state income taxes and will take effect when Mainers file their 2022 tax returns next spring.

  • The state’s earned income tax credit has been doubled. The maximum earned income tax credit for a single filer for 2022 is increased from $140 to $280 and for a family the maximum credit is increased from $832 to $1,734. Around 100,000 Maine households benefit from the earned income tax credit and will receive an average benefit of about $400.
  • The state’s property tax fairness credit has been increased from $750 to $1,000 for individuals under 65 and from $1,200 to $1,500 for people age 65 and over. The property tax fairness credit reimburses households with low income for property taxes they pay that exceed 4 percent of their income. The credit uses a similar formula for renters who have high rent costs proportionate to their incomes.

Two changes will help retired state employees and teachers better make ends meet amidst higher costs.

  • Changes to the state pension in 2011 capped cost of living adjustments to 3 percent on the first $20,000 in pension income. Faced with 5.4 percent inflation, retired teachers and state employees risked losing significant ground to inflation. Allocations were made to raise the cost-of-living adjustment beyond the statutory 3 percent to 4 percent and raise the base income at which the cost-of-living adjustment applies to $24,186 starting next year.
  • Additionally, changes have been made to tax laws to improve tax equity between state retirees and people who have social security income. Maine does not tax social security income but does tax state pension income, which many public retirees have in place of social security benefits. The overall pension deduction for all retirees has been increased from $10,000 to $35,000. This policy will certainly aid state retirees who are currently taxed inequitably compared to other retirees, but the benefit is also available to filers with private pension savings such as 401(k) or IRA accounts which significantly increases the costs of this proposal to state revenues in the future.

Fiscal planning

Structural changes have been made to make the state’s finances more flexible to meet education and health care needs and fill gaps in the highway fund.

Even with the $1.2 billion in projected surplus the budget writers appropriated, state revenues are still running ahead of those projections. State dollars that exceed projections at the end of the fiscal year are subject to the ‘cascade,’ a formula that divides up the excess money exceeding projections and transfers it into various accounts. As of March , revenues were $98 million ahead of projections and as long as revenues remain strong, the budget will allocate the following with the cascade:

  • $35 million for the highway fund
  • $15 million for a new education stabilization fund, created to ensure the state can continue to meet its commitment to fund at least 55 percent of the cost of education
  • $3.3 million for a new disaster recovery fund, created to have resources available as matching funds to draw down federal dollars in the event of a disaster such as a big storm
  • $15 million for the multimodal transportation fund

New authorizations have been made for the Department of Health and Human Services to use the state’s Medicaid stabilization fund to supplement reimbursement rates for direct care work when minimum wage increases exceed the funding allocated by the budget. Many direct care positions are tied to a wage floor of at least 125 percent of the minimum wage which increases each year with inflation.

Rather than bond for road construction, an additional $50 million in general funds have been allocated to support infrastructure projects that will have a long life. This is unfortunate as interest rates are still low, especially in relation to inflation, and borrowing remains prudent fiscal policy for long-term infrastructure.


Overall, this budget makes historic investments in Mainers that will help families better afford higher costs from pandemic and sanction induced inflation. The budget also sets the stage for ongoing structural supports of Maine’s child care workforce and continues the return to fully investing in Maine communities through revenue sharing and education funding. Maine is forecast to maintain these high revenue amounts into the next budget cycle. Continuing to push for resources to provide for the needs of families and workers will empower Maine in its recovery and establish a stronger economy for everyone.