AUGUSTA — Gov. Janet Mills released a supplemental budget proposal Tuesday, Feb. 15, that would return half of the state’s projected $822 million surplus to taxpayers in the form of direct checks, spend $100 million to fix roads and bridges and increase the state’s Rainy Day fund to more than $500 million for the first time in state history.

Mills’ supplemental budget also would pay for other priorities outlined last week in her State of the State address, including a $20 million plan to provide free community college tuition for high school students affected by the pandemic and $27 million to provide universal free meals in schools. It includes $7 million in property tax relief and $26.7 million in income tax relief for low- and middle-income families.

The budget, which also proposes $9.2 million in additional funding to address PFAS, or forever chemicals, in soils and drinking water, leaves $12 million to be used at the discretion of state lawmakers, according to a statement.

“This budget proposal is bipartisan in nature, drawing on good ideas from both Republicans and Democrats to tackle some of Maine’s most pressing issues, like inflation and our longstanding workforce shortage, by giving back money to Maine people, delivering tax relief for working families, and providing two years of free community college to help our students and our employers,” Mills said in a written statement. “It accomplishes these important things in a fiscally-responsible manner while also increasing the Rainy Day Fund to a new, record high. I look forward to working with the Legislature as they consider this proposal and applaud them for the ideas we incorporated into it.”

The release of the supplemental budget will formally kick off budget negotiations in the Legislature. The process may be complicated by election year politics, with the governor’s office and the entire Legislature up for grabs.

Republicans originally applauded Mills’ proposal to return half of the surplus to taxpayers. But they are also pushing for long-term tax and spending reforms.

“She’s solving the wrong problem. We need to reform our tax structure from income and sales taxes so you get to keep more of your money for you and your family,” Senate Minority Leader Jeffrey Timberlake, of Turner, said Feb. 11 in the Republican radio address. “We also need to reduce our spending and adjust for inflation to match tax cuts or else future generations will be saddled with unsustainable financial cliffs that we’ll be creating today.”

Mills laid out her priorities during her State of the State address Feb.10. Her supplemental budget comes after the state’s nonpartisan Revenue Forecasting Committee projected a surplus of $822 million through mid-2023, as revenues exceeded expectations because of federal relief funding and consumer spending. However, budget forecasters warned that the long-term revenue picture remained volatile, because the pandemic remains unpredictable.

Last week, Mills called on the Legislature to send $500 checks to about 800,000 taxpayers. That proposal exceeds in both size and scope the previous payback program, initiated by Republicans, which sent checks of $285 to about 500,000 Mainers who worked during the pandemic. This round would reach more Mainers, because it’s targeted at taxpayers, rather than workers, the administration said.

Mills also proposed tens of millions of dollars in investments for education, including $20 million to pay for up to two years of tuition at community colleges for high school students most affected by the pandemic — the classes of 2020, 2021, 2022 and 2023. She also proposed $7.9 million in funding for the University of Maine System to prevent tuition hikes. And she proposed a $30 million Education Stabilization fund, to help ensure the state continues to meet its commitment to fund 55% of local education costs.

The supplemental budget also provides a one-time adjustment to state employee pensions to keep pace with inflation. However, the one-time, noncumulative $14.7 million adjustment is well short of what was requested. The state employees’ union, in a letter signed by a bipartisan group of lawmakers, called for an increase to the base pensions, which would have cost nearly $147 million.

Mills proposed $7 million in addition funding for Maine’s Property Tax Fairness Credit to help reduce the property tax burden for low- and middle-income households. If approved, the ongoing funding would help an estimated 100,000 property owners and renters paying more than 4% of their household budgets in property taxes or rent by providing a refundable tax credit of up to $1,000 each year. Seniors would received a maximum  benefit of $1,500.

Income tax relief for low- and middle-income families was also proposed. Mills proposed $27.7 million in ongoing funding to increase the value of the Maine Earned Income Tax Credit. The administration projected it would help 100,000 Maine people, primarily working families with incomes of less than $57,414, by increasing the maximum benefit by an average of $400 per family, bringing the total EITC benefit per family to an average of $764 per year.

Mills also proposed adding $10 million to the state’s Rainy Day fund.