Maine’s next governor will face the early challenge of proposing a balanced state budget, and a projected hole of more than $1 billion may complicate that task.

The periodic fiscal forecast, which state officials released Sept. 30, predicts a General Fund gap of $1.085 billion and a Highway Fund gap of $256.7 million for the next two-year budget running from the middle of 2027 through the middle of 2029. The governor who succeeds Gov. Janet Mills, a Democrat, must present a balanced budget proposal to state lawmakers by February before the Legislature seeks to pass a plan that kicks in July 1, 2027.

Under state law, the budget bureau within the Department of Administrative and Financial Services completes the Four-Year Revenue and Expenditure Forecast every other year. The projected gap represents how much estimated revenue is falling short of what existing statutes require the state to spend. These mandatory expenditures include maintaining state support for 55% of K-12 education costs, 5% spending on municipal revenue sharing and pensions for retired teachers.

Finance Commissioner Elaine Clark noted that “many of the funding obligations considered in the report are, with Legislative approval, routinely not met” and that the report should only serve as a “starting point” for lawmakers as they begin budget discussions rather than “an accurate reflection of an actual budget shortfall facing State government.”

Former Maine House Speaker Hannah Pingree, a Democrat who led Mills’ policy office, has consistently led polling of the gubernatorial race over Republican Bobby Charles, a lawyer and former assistant U.S. secretary of state, and independent Rick Bennett, a former Maine Republican Party chair and state senator.

Here’s what each candidate said when asked during Thursday evening’s debate about how they would fill a budget gap if elected governor. The debate was not the only time the candidates have discussed the budget, with the Portland Press Herald’s Voter Guide among the other places to review their policy plans.

Charles, 66, began his budget answer by alluding to how Pingree led the Governor’s Office of Policy Innovation and the Future from 2019 to 2025, criticizing the Democratic candidate as “the right hand of the governor that put us in all these problem sets.”

“It’s like inviting the arsonist back to put out the fire,” Charles said of electing Pingree.

However, the budget problems are not unique to the outgoing Mills administration. The finance department previously noted that aside from 2022, each report since 2014 had projected a structural gap.

These gaps have occurred under past governors of independent, Republican and Democratic stripes. The projected deficit was also around $1 billion when then-Gov. Angus King, an independent who is now in the U.S. Senate, left office in 2003 and Democratic Gov. John Baldacci took over.

Still, Charles said, the state needs to cut down on its spending. As part of his previously stated plan to ultimately slash $4 billion from the state budget, which is currently near $12 billion, and phase out the income tax, Charles said he would first nix at least $1 billion “by reducing the fraud” as well as eliminating sole source contracts.

He referred to fraud to the tune of $2.1 billion in Maine, though that appeared to reference State Auditor Matt Dunlap’s annual audit in 2024 that noted “deficiencies” and “material weaknesses” involving $2.1 billion in federal spending.

Charles said he would cut 2,000 unfilled state jobs, implement an immediate hiring freeze and order a “top-to-bottom review” of all state agencies while “restructuring” the education and health departments. He would task each commissioner with trimming department costs by 10%.

“None of this, by the way, has any effect on services,” Charles said. “It only makes us more efficient.”

He also argued for ending the process known as the “cascade,” in which unspent surplus General Fund money is transferred at the end of each fiscal year to different areas, such as the Highway Fund.

Charles ended his response with another dig at Pingree. He said he would eliminate the governor’s policy office that oversees housing, climate, economic and other initiatives — which Pingree used to lead.

Pingree, 49, started her answer by blaming President Donald Trump’s tariffs and the Iran war for putting “huge headwinds on our economy,” and she criticized cuts to Medicaid and food benefits in his One Big Beautiful Bill Act.

She mentioned getting first elected to the Legislature in 2002 and serving on the Appropriations and Financial Affairs Committee when lawmakers and Baldacci faced the roughly $1 billion shortfall. She touted her work with Republicans to pass bipartisan, balanced budgets, including working with then-Republican floor leader Josh Tardy when she was the Maine House speaker from 2008 to 2010.

But Pingree remained light on specifics to fill a budget gap, other than saying she would double the homestead exemption to $50,000 and amend the Maine Constitution to tax second homes that non-Maine residents own in the state at a higher rate.

That second idea from Pingree looks unlikely to pass in the near future, given it would take a two-thirds majority vote in both chambers to amend the Maine Constitution that currently requires all property to be taxed equally per its true value.

Dan Pittman, a Maine Revenue Services lawyer, confirmed to lawmakers last month that such a proposal, or policies like Rhode Island’s “Taylor Swift” tax on empty vacation homes, are not allowed in Maine without a constitutional change.

Charles and Bennett said they disagree with Pingree’s proposal. Pingree acknowledged the hurdles facing her plan but doubled down on pursuing it.

“That is a big thing to do, but we’ve amended our constitution many, many times before, and it would require bipartisan support,” Pingree said. “But I’ll tell you, from Washington County down to southern Maine, people realize that Maine people are having a hard time keeping their home.”

Bennett, 63, kicked off his answer by warning about the growth in the state budget over the past decade and how the Mills administration pushed federal money for COVID-19 pandemic relief “out the front door.” He criticized the Legislature for not holding a true public hearing on the continuing services budget that funds baseline services in six years.

“We are spending, in the state government, well beyond the means of Mainers to pay,” Bennett said. “That’s a reality. We need some fiscal prudence.”

If elected, Bennett said, he would put together a finance team the day after the Nov. 3 election to look at every line in the state budget, and he said he would return to the Legislature’s former tradition of passing budgets with at least two-thirds support.

To avoid devoting state dollars to paying back the federal government for potential fiscal issues, Bennett said his office would have an inspector general team that investigates potential misspending or corruption.