Does Maine law require the Governor to balance the state budget before the new fiscal year begins, or only to react if revenues fall short during the year?

Plain-English summary

Governor John R. McKernan asked Tierney's office whether Maine law required him to ensure that the FY 1991 state budget was in balance before fiscal year start on July 1, 1990. Chief Deputy Attorney General James T. Kilbreth answered no. Maine's balanced-budget regime is real but reactive, not anticipatory.

Two legal obligations operate on state budgeting. First, Me. Const. art. IX, § 14 prohibits the State from incurring debts or liabilities in excess of $2 million absent bond authorization by the Legislature and the people. That ceiling, combined with restrictions on temporary loans, has the practical effect of forcing the State to function on a cash basis and precludes deficit financing. Second, the State Budget Act (5 M.R.S.A. §§ 3661 et seq.) requires the Governor to submit a budget for each biennium "showing the balanced relations between the total proposed expenditures and the total anticipated revenues." But the submission requirement applies at the outset of each biennium, not as an ongoing duty mid-year.

Kilbreth's logic ran like this. The constitutional debt limit prohibits incurring new long-term obligations in excess of $2 million. It does not, however, require any particular advance step before fiscal year start. The statutory submission duty was satisfied when the Governor delivered the original biennial budget. If revenues then fell short during the fiscal year, two remedies were available: (1) the Governor and the Legislature could enact an amended budget reflecting projected revenue reductions; or (2) the Governor could temporarily curtail allotments under 5 M.R.S.A. § 1668. Section 1668 lets the Governor, after receiving a written report from the Commissioner of Finance and Administration that anticipated income will not meet authorized expenditures, "temporarily curtail allotments equitably so that expenditures will not exceed the anticipated income and other available funds." No allotment may be terminated, and the Governor must notify legislative leaders of the specifics and impact of any curtailment so the Legislature can amend the budget if it chooses.

The opinion attaches two earlier AG opinions on related questions: AG Richard S. Cohen's March 19, 1980 opinion (Op. Me. Att'y Gen. 80-65) to Senator Jerome A. Emerson, ruling that the Governor's § 1668 curtailment authority does not extend to money in the State Aid Construction Fund (23 M.R.S.A. §§ 1101-1109) appropriated and matched with municipal contributions in prior biennia; and AG James E. Tierney's March 2, 1983 opinion to Representative John Diamond, concluding that Maine's constitutional and statutory structure already contemplates a balanced budget. The 1980 opinion's broader teaching is that not every state account is reachable by § 1668. The State Aid Construction Fund is a "joint fund" carried as a nonlapsing account for highway purposes, and a general principle of law prohibits diverting special-fund money to other purposes.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What does Article IX, Section 14 of the Maine Constitution actually prohibit?

It prohibits the Legislature from creating debts or liabilities that, together with all previous debts, exceed $2 million at any one time, except (a) to suppress insurrection, repel invasion, or prosecute war; (b) for temporary loans repaid from taxes raised during the same fiscal year; and (c) by two-thirds vote of both houses authorizing bonds ratified by a majority of voters at a general or special election. The effect is to require the State to function largely on cash revenues, with limited borrowing capacity.

What is the difference between "appropriations" and "allotments" in Maine state finance?

The Legislature appropriates funds in the biennial budget act. The Department of Administration and Finance then allots those appropriations to agencies in tranches across the fiscal year. Section 1668 lets the Governor temporarily curtail those allotments when revenues fall short, but the underlying appropriation remains in place. The opinion stresses that "no allotment shall be terminated" under § 1668; the Governor's power is only to defer, not to repeal.

Did the opinion say a Maine balanced-budget constitutional amendment was unnecessary?

The attached 1983 Tierney opinion to Representative Diamond reached that conclusion. It read Maine's existing constitutional and statutory structure as contemplating a balanced budget, even without a dedicated balanced-budget constitutional provision. That reading rested on the debt-limit clause combined with the budget statutes.

Why was the State Aid Construction Fund treated differently in the 1980 opinion?

The Fund was a "joint fund" under 23 M.R.S.A. § 1102, made up of municipal appropriations matched by state contributions for state-aid highway projects. The General Highway Fund's nonlapsing-carrying-account treatment in § 1652 was designed to let unused state contributions stay in the joint fund for future highway use rather than reverting to general revenue. AG Cohen concluded that allowing § 1668 curtailments to reach money already placed in the joint fund would amount to diverting special-fund money to non-highway purposes, violating both the special-fund principle and the legislative intent behind the nonlapsing provision.

What would the Governor do if the Legislature adjourned without an amended balanced budget?

The 1990 opinion answered that the Governor could exercise his § 1668 curtailment authority in fiscal 1991 to assure a balanced budget for that year. That power is restricted to temporary curtailments on an emergency basis, not permanent reductions.

Background and statutory framework

Maine's budget regime in 1990 was built from layers: a constitutional debt limit set in the original Constitution (Me. Const. art. IX, § 14), the State Budget Act of Title 5 governing submission and execution, and § 1668's curtailment authority added in 1976 (P.L. 1975, c. 771, § 77-A) when the executive functions of the abolished Executive Council were redistributed. Section 1668 was added by floor amendment in the Senate; the Statement of Fact attached to S-526 explained that the amendment codified what had long been a recurring provision of biennial appropriations bills granting the Governor and the Executive Council emergency curtailment authority. Sponsor Senator Merrill described the amendment as a "very minor step" beyond existing practice. The 1976 enactment merely required that any curtailment be equitable, consistent so far as practicable with legislative intent, and reported to legislative leadership so the Legislature could correct course if necessary. The structure left the Governor with substantial flexibility once a shortfall materialized, but did not impose any duty to act prospectively to balance the budget.

Citations

• Me. Const. art. IX, § 14 (state debt limit)
• 5 M.R.S.A. §§ 3661 et seq. (State Budget Act)
• 5 M.R.S.A. § 1663 (scope of the budget)
• 5 M.R.S.A. § 1664 (Part 1 of budget; balanced relations)
• 5 M.R.S.A. § 1666 (budget estimates)
• 5 M.R.S.A. § 1668 (temporary curtailment of allotments)
• 5 M.R.S.A. §§ 1511, 1544 (surplus procedures)
• 23 M.R.S.A. §§ 1101-1109 (State Aid Construction Fund)
• 23 M.R.S.A. § 1102 (joint fund for highway construction)
• 23 M.R.S.A. § 1652 (General Highway Fund nonlapsing carrying accounts)
• P.L. 1913, ch. 130, §§ 19-25 (creation of State Aid Construction Fund)
• P.L. 1931, ch. 251, § 4 (establishment of General Highway Fund)
• P.L. 1975, ch. 771, § 77-A (1976) (enactment of § 1668)
• P. & S.L. 1975, ch. 147, § 3 (1976) (predecessor curtailment provision)
• Stein v. Morrison, 75 P. 246 (Ida. 1904) (states with debt limits function on a cash basis)
• People ex rel. Ogilvie v. Lewis, 274 N.E.2d 87, 88 (Ill. 1971) (definition of balanced budget)
• Opinion of the Justices, 376 N.E.2d 1217, 1225 (Mass. 1978) (Massachusetts balanced-budget construction)
• Op. Me. Att'y Gen. 80-65 (Mar. 19, 1980) (curtailment authority does not reach State Aid Construction Fund)
• Mass. Const. art. 63, § 2
• Colo. Const. art. X, § 16 and art. XI, § 3
• 81A C.J.S. States § 228 (1977) (special-fund principle)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1990/ag_19900112.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

JAMES E. TIERNEY
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
STATE HOUSE STATION 6
AUGUSTA, MAINE 04333

January 12, 1990

Honorable John R. McKernan, Jr.
State House Station #1
Augusta, ME 04333

Dear Governor McKernan:

This is in response to your inquiry of January 11 whether Maine law requires you to ensure that the State budget for fiscal year 1991 is in balance prior to the commencement of that year on July 1, 1990. For the reasons which follow, it is the opinion of this Department that you are under no such obligation.

As set forth more fully in the attached Opinion of the Attorney General of March 2, 1983, there are two legal obligations concerning the balancing of the State budget. First, Article IX, Section 14 of the Maine Constitution prohibits the State from incurring any debts or liabilities in excess of $2,000,000, unless bonds to cover any debt or liability in excess of that amount are approved by the Legislature and the people. Second, Section 1664 of the State Budget Act, 5 M.R.S.A. §§ 3661 et seq., requires that the Governor submit a budget for each biennium showing "the balanced relations between the total proposed expenditures and the total anticipated revenues together with the other means of financing the budget for each fiscal year of the ensuing biennium."

The second of these requirements is not implicated by your question, since it relates only to the submission of a proposed budget at the outset of each biennium. The first requirement, however, does impose upon the State government the obligation not to overspend (in excess of $2,000,000) actual revenues (and other available funds). Thus, during any one fiscal year, if insufficient funds are on hand to meet new debts or liabilities, no such obligations (in excess of $2,000,000) can be incurred. Article IX, Section 14 of the Maine Constitution, however, does not require you to take any particular step in advance of the actual event of such a shortfall. As we understand it, no shortfall is projected for fiscal 1990 in any case.

With respect to your question about how you may act to assure that the budget remains in balance, the answer depends on the circumstances. First, and most obvious, you and the Legislature may enact an amended budget for the biennium to take into account projected reductions in revenues. Second, if it appears that revenues will be insufficient to meet budgeted expenses, you may "temporarily curtail" allotments following the procedures set forth in 5 M.R.S.A. § 1668. As the attached opinion reflects, that section requires an explanation of the impact of such curtailments so that the Legislature may amend the budget should it choose to do so in response to your action. Op. Me. Att'y Gen. 80-65.

This leads to your final question about FY 1991. Should the Legislature adjourn without enacting an amended balanced budget, you could exercise your allotment curtailment powers in fiscal 1991 to assure a balanced budget for that year. That power is, as the attached opinion by Attorney General Cohen makes clear, restricted to temporary curtailments of allotments, on an emergency basis.

I hope the foregoing answers your questions. Please feel free to reinquire if further clarification is necessary.

Sincerely,
JAMES T. KILBRETH
Chief Deputy Attorney General

JTK:sw

Two prior opinions were physically attached to this letter in the source document and supply the supporting authority cited in the analysis above. The source PDF is an image-only scan, so the attachments are not transcribed verbatim here; the linked PDF is authoritative for their full text.

• Op. Me. Att'y Gen. of March 2, 1983 to Representative John Diamond, from Attorney General James E. Tierney, concluding that Maine's existing constitutional and statutory structure contemplates a balanced budget without need for a constitutional amendment. It reasons that the Me. Const. art. IX, § 14 debt limit, by restricting temporary loans, requires the State to function on a "cash basis," citing Stein v. Morrison, 75 P. 246 (Ida. 1904); defines "balanced budget" with reference to People ex rel. Ogilvie v. Lewis, 274 N.E.2d 87, 88 (Ill. 1971); and compares other states' express balanced-budget provisions, Mass. Const. art. 63, § 2; Opinion of the Justices, 376 N.E.2d 1217, 1225 (Mass. 1978); Colo. Const. art. X, § 16, and art. XI, § 3. On the statutory side it reads the State Budget Act as contemplating a balanced budget submitted to the Legislature: 5 M.R.S.A. § 1663 sets out the scope of the budget, § 1664 requires that Part 1 of the budget show balanced relations between expenditures and revenues, § 1666 anticipates a budget based on estimates of needs and total anticipated income, and §§ 1511 and 1544 provide for handling surpluses in a structure in which no deficits are to occur.

• Op. Me. Att'y Gen. of March 19, 1980 (80-65) to Senator Jerome A. Emerson, from Attorney General Richard S. Cohen, ruling that 5 M.R.S.A. § 1668 does not authorize curtailment of State Aid Construction Fund allotments appropriated and matched with municipal contributions in prior biennia. The State Aid Construction Fund was created in 1913, P.L. 1913, c. 130, §§ 19-25, now codified as amended at 23 M.R.S.A. §§ 1101-1109, and characterized as a "joint fund," 23 M.R.S.A. § 1102; the Legislature provided in P.L. 1931, c. 251, § 4, now 23 M.R.S.A. § 1652, that the joint fund constitute a nonlapsing carrying account. Section 1668 was enacted by P.L. 1975, c. 771, § 77-A (1976) when the functions of the abolished Executive Council were redistributed. The opinion applies the special-fund principle that "[w]here a special fund is created or set aside by statute for a particular purpose or use, it must be administered and expended in accordance with the statute, and must be applied only to the purpose for which it was created or set aside, and not diverted to any other purpose, or transferred to any other fund." 81A C.J.S. States § 228 (1977).