How Maine will use $1.25 billion in federal aid will be among the topics discussed Friday when the Legislature’s budget-writing committee gets its first update on how the COVID-19 pandemic is affecting the state’s economy and tax collections.

Administrative and Financial Services Commissioner Kirsten Figueroa, seen last year, will field questions Friday from the Legislature’s budget-writing committee. Joe Phelan/Kennebec Journal

The meeting will be the first for the Appropriations and Financial Affairs Committee since the Legislature adjourned abruptly in early March as the first cases of COVID-19 began to appear in Maine.

It will also be the first formal opportunity for lawmakers to seek information from the state’s top financial official, Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services. Committee members will also start discussing how to keep the state’s two-year, $8 billion budget in balance, as required by the state Constitution.

Gov. Janet Mills has balked at spending any of the $1.25 billion in federal CARES Act funding, saying she wants more detailed guidance from Congress or the Trump administration on authorized uses.

The governor has promised to work with the budget-writing committee to “figure out just what we can and should do with those funds.” She also said she believes Congress will take additional action in the next two weeks either to send more money to states or to add flexibility in how CARES Act funding can be used.

The federal law limits the use of the funding to COVID-19-related expenses, but does not allow states to use it to reduce revenue losses caused by the pandemic’s impact on the economy.

Mills said she’s hesitant to use the funds in any way that may require the state to repay the money.

But a coalition of mayors from Maine’s largest cities have been urging Mills to develop a plan for the funds that includes sharing some with cities and towns, which are also facing budget shortfalls from pandemic-related spending and lost revenues.

In April, state tax collections were nearly half of what was projected, much of that due to the income tax filing deadline being delayed to July 15.

Lawmakers seem to agree the state has enough revenue in its “rainy day” or budget stabilization fund to keep the state budget balanced for the state’s current fiscal year, ending June 30. But it’s also clear that declining sales and income tax revenues will lead to a potentially historic revenue shortfall in 2021.

Other states, including New Hampshire, have started to allocate some of the federal aid they received to county and municipal governments.

Sen. Cathy Breen, D-Falmouth, Senate chairwoman of the committee, said part of the conversation Friday will be about how the process might work in Maine, what additional federal aid may be on the way and how other federal funds sent to the state will be used.

But without a bill before the committee and with the Legislature adjourned, lawmakers will mostly be gathering information as they prepare to balance the budget.

“Right now it’s like money in a bank account and we don’t even have a vehicle to begin to enumerate and negotiate on,” Breen said.

The Legislature’s Democratic majority has touted additional allocations made to the rainy day fund in 2019. In all, Mills and lawmakers have about $192 million they can draw on to help balance the budget, Breen said.

“While none of us saw this crisis coming, Maine is in a stronger position to weather the storm,” Senate President Troy Jackson, D-Allagash, said in a written statement.

Financial forecasts show state governments across the country facing enormous budget gaps in 2021, according to the National Conference of State Legislatures and the Federal Reserve Bank of Boston’s Public Policy Center. Moody’s Analytics, a financial research firm, suggests the shortfall for Maine could be as large as $1 billion in 2021.

“As we look forward, we know the anticipated economic downturn will create incredible hardships across the state,” House Speaker Sara Gideon, D-Freeport, said in a written statement urging lawmakers to work collaboratively.

House Republicans said Wednesday that Democrats now need to be prepared to trim state spending.

“Over and over, Republicans asked what would happen if the economy slowed down, or if there was an emergency?” John Bott, a spokesman for the House Republican minority caucus, said in an email message. “Now the only responsible question for Democrats is what areas are you proposing to cut when the Legislature goes back into session?”

This story was changed on May 28, 2020, to correct the spelling of finance commissioner Kirsten Figueroa’s name and correct the name of the Department of Administrative and Financial Services.

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