Understand the state budget

Understand the state budget

An introduction to understanding the state budget

by Eliza Townsend (former Executive Director) and Jim Clair

The Budget(s)

The State of Maine operates on a biennial budget, meaning it develops a budget for two years at a time. The Governor presents their proposed budget to the Legislature early in the First Regular Session of the Legislature for its review. Maine’s fiscal year runs from July 1 to June 30 (in contrast to the federal government and many municipalities) and the fiscal year is referred to by the year in which it ends.

The timing of the fiscal years and of the Legislature’s passage of the budget are critical, because unless a budget is in place by midnight on June 30 in the second year of the biennial budget, no government functions can continue. In 2017 the Governor and lawmakers failed to reach agreement on a budget before July 1, triggering a shutdown of state government.

Maine has at least two distinct budgets:

  1. The Highway Fund budget derives revenues from the gasoline tax and a variety of fees and fines and is used for transportation purposes such as highway maintenance and funding the State Police. It is reviewed by the Legislature’s Joint Standing Committee on Transportation. 
  2. The General Fund budget derives revenues primarily from the income and sales tax (both individual and corporate) lottery ticket sales, and a variety of fees and fines. (There are other revenue sources, such as federal and dedicated funds, which are allocated in sections of the General Fund budget). It is reviewed by the Legislature’s Joint standing Committee on Appropriations and Financial Affairs. 

The two budgets were constitutionally separated in the 1950’s. Each budget has the same structure.

The budget is broken into two basic parts: 

  1. Part I funds current services, with a built-in inflation factor. It is sometimes referred to as what is needed to “keep the store open.” In other words, it is the cost to continue all obligations including those that are constitutional (i.e. debt service on general fund bonds); statutory (i.e. K-12 education per-pupil guarantees set in law); and legal (i.e. the AMHI consent decree.)
  2. Part II consists of new and expanded programs, usually those initiatives which form the cornerstones of the Governor’s agenda, and the reorganizations of state agencies. 

Because it is in addition to the Part I budget, Part II is sometimes referred to as a supplemental budget. This can be confusing because many Legislative sessions begin with a smaller supplemental budget needed to adjust spending levels in a limited number of programs. Such a supplemental can be necessary to cover shortfalls or spend a surplus. 

How to Read It

A budget is further broken down into a series of parts, labeled alphabetically. Part A-1 adjusts spending levels in the General Fund via appropriations (spending) or deappropriations (cuts). Deappropriations appear in parentheses.

The budget also allocates funds from other sources: federal funds, federal block grants, and dedicated revenues, known as Other Special Revenues. Examples of Other Special Revenue accounts include revenues from certain licenses dedicated to programs in the Department of Marine Resources. There are many such special revenue accounts, including the Fund for a Healthy Maine, which derives from tobacco settlement payments. A quick way to recognize whether you are reading a General Fund section or another is to note the verb. General Funds are appropriated, all non-General Fund revenues are allocated. Also, each section begins with language spelling out the funding source, i.e. “There are appropriated from the General Fund for the fiscal year XX to the departments listed the following sums.”

Within the section, spending is organized by department in alphabetical order: Administration and Financial Services; Agriculture, Food and Rural Resources, and so on.

Any additions to the budget follow these and are given their own Part, still labeled alphabetically. A completed budget can contain so many Parts they are labeled ZZZ, for instance.

Resources

The Budget Process, Maine Office of Fiscal & Program Review

The Fiscal Note Process, Maine Office of Fiscal & Program Review