A large chunk of the $1.25 billion in federal funds Maine received to help state government respond to the COVID-19 pandemic will likely be used to replenish the state’s unemployment compensation trust fund, a top official in the Mills administration told lawmakers Friday.

Administrative and Financial Services Commissioner Kirsten Figueroa, the state’s chief financial officer, said the state will need to use $270 million of the pandemic funding to back-fill the trust fund to keep it solvent and stave off sharp increases in the rates employers pay into the fund for their workers.

Between April and June, the state had paid out $270 million to laid-off workers – a dramatic increase from the $20 million paid out during the same time period in 2019, Figueroa told lawmakers on the Appropriations and Financial Affairs Committee.

Maine’s fund was at about $500 million before the onset of coronavirus-related unemployment and was considered the 11th most stable fund in the nation, with the ability to pay out $8 million a week in benefits to unemployed workers for up to 16 months, according to an analysis by the Tax Foundation, Figueroa said.

“Again,” she said. “That’s pre COVID-19.”  She said the fund was paying out approximately $22 million per week now in benefits.

“At this rate the trust will be out of funds by September,” Figueroa said. She said using the funds for that purpose would ultimately help employers.

“It minimizes the unemployment tax rate increase resulting from this unexpected new level of benefits being paid out for these 45,000 Maine businesses,” Figueroa said. She said the impact of unemployment tax increases are felt the most by smaller businesses, which make up a large portion of the state’s employers and tend to have lower-waged workers. “Because this tax is a higher percentage of their overall payroll expenses, increases are harder to absorb,” she said.

Figueroa also gave lawmakers some of the other proposed uses for the federal funds including sending $11 million to K-12 public schools in Maine for the purchase of personal protective equipment and other expenses that will come if schools reopen in the fall. She said another $13 million had been earmarked to go to cities and towns to help them cover COVID-19-related prevention and education efforts. The Maine Center for Disease Control has also already spent about $18.1 million on personal protective equipment that has been distributed to hospitals, nursing homes and other long-term care facilities across the state, Figueroa said.

In all, Maine has received about $6.2 billion in total federal aid, including funding that flowed to businesses in the form of the Paycheck Protection Program via the Small Business Administration and the funding for a supplemental $600 per week unemployment bonus for those who lost work because of COVID-19. That program is set to expire at the end of July.

Figueroa said another $170 million in federal funds is expected but not yet allocated.

Commissioner of the Maine Department of Administrative and Financial Services Kirsten Figueroa Joe Phelan/Kennebec Journal

The state’s top tax official, Mike Allen, an associate commissioner of DAFS and the director of econometrics at the Maine Revenue Service, told the committee the state was seeing dramatic decreases in sale tax receipts, much of that associated with closed lodging and restaurants, which were now slowly reopening. For May, Allen said, the state’s sales tax receipts were under budget by $26.4 million, and under budget for the year by $43.3 million.

“At the moment, it’s the sales tax line that’s driving the revenue problems we are having in the general fund,” Allen said.

Lawmakers also heard from Hannah Pingree, the director of the Governor’s Office of Policy Innovation and Future, about the work of a special coronavirus economic recovery task force that had been set up by Gov. Janet Mills. Pingree noted the task force was working across various sectors of the economy, including hospitality and tourism, healthcare and education and other sectors, and would have specific recommendations for Mills on policies that would help the state repair its fractured economy.

In addition, the committee also was briefed by advocates for a host of nonprofit organizations that provide services to the hungry, the poor, the elderly, the developmentally disabled, the homeless and those struggling with mental health and substance use disorders. All urged lawmakers to use some of the CAREs Act funds to help them survive as well.

Many of the agencies testifying receive grant funding from the state or are subject to Medicaid reimbursement rates that are set by state lawmakers.

Bob Fowler, the executive director of Milestone Recovery, which provides services for those struggling with substance use disorders and homelessness, said many organizations were already facing financial challenges before the pandemic, and demand for their services was continuing to increase.

“The community behavioral health system was really kind of standing on a knife’s edge coming into this crisis,” Fowler said.

Amy Gallant, the vice president of public policy and research for the Good Shepherd Food Bank, which supplies food pantries across the state, said demand for food was at an all-time high. Food pantries were helping 180,000 Mainers with their meals every month before the pandemic and they  expect that figure to grow to 250,000 if high rates of unemployment and poverty persist as the crisis eases, she said.

Gallant said in southern Maine, one in four children is experiencing food insecurity, which represents a 58 percent increase, while in northern Maine and rural parts of the state one in three children is food insecure.

“COVID-19 has brought a swift and crushing blow to the progress we have all made over the last 10 years to provide access to food for Mainers struggling with hunger,” Gallant said. Although thousands of Mainers have also stepped up to help, she said the situation is still dire.

“Our state’s recovery from this crisis may bring the greatest demand our charitable food network has ever seen,” Gallant said. “We know that this is just the beginning.”

 


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