The Maine Department of Health and Human Services has passed a new rule that clarifies how it will reimburse communities that run emergency shelters — a change that will cut the rate paid to Portland nearly in half.

The city, which houses more people each night in emergency shelters than any other municipality in Maine, is expected to bear the brunt of that change.

Rule 26 went into effect on April 1 and now officially ties the state’s payments to the rate the agency has set for a studio or efficiency apartment, a standard known as the “zero-bedroom rate.” That number is adjusted annually and is based on location-specific fair market rents as established by the federal Department of Housing and Urban Development.

Portland leaders have said the change will place an undue burden on the city. However, the department argues that this has always been the rule; Portland was just getting reimbursed too generously.

In an emailed statement on Friday afternoon, Lindsay Hammes, a spokesperson for the state Department of Health and Human Services, wrote that the rule simply “reasserts” the state’s longstanding policy.

“As of October 1, 2024, the applicable rate for a single individual in Portland was $48 per night. As of April 1, 2025, the rate remains unchanged by the recently adopted rules and is still $48 per night,” wrote Hammes. 

In a notice of violation the state filed against the city last fall, it said Portland had been requesting $84 per night, which city officials said at the time was determined by shelter operating expenses.

In an op-ed published in the Press Herald last fall, shortly after the rule change was proposed, Portland Mayor Mark Dion wrote that equating shelter operating expenses per bed to the expense of operating an efficiency apartment is deeply flawed.

“An emergency shelter costs far more to run (than apartments), due to the lease of a facility, all-inclusive utilities, contractual services, facility maintenance, janitorial supplies and laundry services for bedding. These costs are in addition to the salaries for professional staff who help people in shelters achieve stability and move forward in their lives,” he wrote.

The city has said that, prior to September, when the state issued the notice of violation, there had been no indication of a problem. In fact, a city spokesperson said, the state had been reimbursing Portland at the $84 rate since July 2023.

The reimbursement rate had been lower before then, but the city also changed the services it provided around that time with the Homeless Services Center opening in March 2023 and the shelter’s subsequent expansion in the fall of 2023.

Dion said he has asked the City Council to meet with its attorneys in executive session Wednesday to learn more about possible legal options.

“I will have no further comment until we have conferred with our lawyer,” Dion wrote in an email.

BUDGET IMPLICATIONS

The city had been expecting this change, so when City Manager Danielle West presented a proposed budget for the next fiscal year, it accounted for these cuts to shelter funding, said spokesperson Jessica Grondin.

Rule 26 will cost the city about $4.4 million, Grondin said. Paired with a pending proposal by Gov. Janet Mills that would limit those who receive emergency housing assistance through General Assistance to three months within a one-year period, the city could be out about $5.9 million, she said.

General Assistance is distributed at the local level to residents who can’t afford to pay rent or other basic necessities. Under state law, municipalities can receive 70% reimbursement from the state for eligible General Assistance expenses, which include thing like shelter operating costs and food subsidies.

The proposed municipal budget was written as if both cuts were final. Should Mills’ proposal to cap rental assistance not go through, that may free up the city to use less of its rainy day fund to close the budget gap. West proposed pulling nearly $9 million from the fund.

But no matter what, Portland is counting on substantially less help from the state in the coming year, something that has frustrated Dion.

In public comment submitted to the state ahead of the new rule’s adoption, Dion wrote that the rule change would “undermine the City of Portland’s recent efforts to increase shelter capacity so that beds could be made available to people sleeping in large encampments, which posed serious health and safety risks.”