Governor Janet Mills’ FY 2026 supplemental budget marks a clear break from the fiscal restraint her administration often claimed to practice. Rather than using Maine’s strong revenue growth to stabilize taxpayers after years of tax increases and inflation, the proposal dramatically expands spending, broadens emergency powers, and doubles down on distortionary tax policy choices that will raise long-term costs—especially for housing and health care.
The result is a budget that spends freely today while pushing structural consequences onto tomorrow’s taxpayers. Governor Mills originally promised fiscal restraint, but clearly that was just an election slogan, one that she has now abandoned for more popular strategies.
From “Rainy Day” to Election-Year Spending
For years, the Mills administration emphasized building up the state’s Budget Stabilization Fund as a sign of prudence. That posture now appears to have been abandoned. The supplemental budget relies on roughly $220 million in stabilization funds to finance one-time rebate checks of $300 per filer—despite no revenue collapse or recessionary emergency.
Using the rainy day fund for broad cash payments during a period of revenue growth raises serious questions. The stabilization fund exists to protect the state during downturns, not to subsidize election-year spending when polling tightens. If this qualifies as an “emergency,” the term has effectively lost all meaning.
Emergency Powers Expanded, With Minimal Legislative Oversight
The budget substantially expands the Governor’s unilateral emergency spending authority. It increases allowable emergency distributions to food banks from $400,000 to $4 million and adds heating assistance to the list of programs that can be funded after just an emergency declaration exceeding just ten days, all without prior legislative approval.
This is a major policy shift. Emergency declarations were designed for short-term crisis response, not as an alternative appropriations process. Yet the Legislature is largely sidelined, with no meaningful requirement for advance approval or contemporaneous review.
Notably, the proposal also expands DHHS emergency authority under Part BBB, continuing a trend of governance by executive exception rather than legislative deliberation.
More Spending on Education and Health, Without Cost Control
The supplemental budget increases education and health-related expenditures yet again, even as prior expansions have failed to deliver corresponding improvements in outcomes or affordability. At the same time, the budget updates the hospital tax base year from 2022 to 2024, a change that will increase hospital tax liabilities—and ultimately be passed on to patients, employers, and insurers in the form of higher healthcare costs.
This is a textbook example of circular budgeting: raise provider taxes to fund spending, then express surprise when costs rise across the system. Maine is facing an affordability crisis, but Gov. Mills apparently is fine with higher taxes being passed on through our medical bills.
A Tax Code That Gets More Complex—and More Distortionary
Rather than pursuing broad-based tax relief, the budget makes a series of narrow, distortion-heavy changes:
- Partial and temporary conformity with federal R&D spending, phased down over time rather than fixed permanently.
- Decoupling from federal accelerated depreciation rules, increasing compliance costs and uncertainty for capital-intensive businesses.
- Repeal of the employer family and medical leave tax credit, raising the effective cost of employment.
- Expansion of refundable credits with aggressive income phase-outs, increasing marginal tax cliffs.
- No adoption of “no tax on tips,” despite widespread regional momentum.
Despite strong revenue growth, the budget includes no rollback of last year’s tax increases and no structural rate relief.
Housing Policy That Subsidizes Demand While Restricting Supply
The supplemental budget allocates over $67 million to housing programs, including:
- $37.5 million for rural affordable rental housing
- $10 million for a one-time “middle-income” housing pilot
- $7.5 million for mobile home construction
- $12 million for homelessness initiatives
At the same time, it consolidates and expands property tax exemptions—establishing a new $25,000 homestead exemption with layered add-ons for veterans and the blind based on age and disability statute.
These policies further distort housing markets by increasing demand-side subsidies while leaving land-use restrictions, permitting delays, and zoning barriers intact. The predictable result is higher prices and tighter supply—particularly for renters and first-time buyers who do not qualify for exemptions.
The Bigger Picture
This supplemental budget reflects a governing philosophy increasingly reliant on:
- One-time money for political rewards
- Executive authority in place of legislative process
- Targeted tax preferences instead of neutral tax reform
- Spending growth without structural cost control
Maine’s fiscal outlook remains strong—for now. But budgets like this make it harder to respond when conditions change. True fiscal responsibility means restraint during good years, not just promises of prudence after the money is gone.
With all the money the Maine government is sitting on, we should be making substantial reductions in budgets and taxes, not expanding spending and taxes even more.
