The Maine Spruce Budworm Bailout

The spruce budworm is back in Maine’s northern forests, and with it comes a troubling revelation about the financial management of our state’s forest industry. In December 2024, Senator Susan Collins secured $14 million in federal disaster relief funding to combat the spreading infestation, supplemented by $2 million in state funding proposed by Governor Mills. By June 2025, approximately 240,000 acres had been treated through an aerial spray program coordinated by the Maine Budworm Response Coalition—a group of large timberland owners.

This is not forest management. This is a bailout.

A Predictable Crisis

The spruce budworm is not a black swan event. It is a native insect, and It is one of the most damaging forest insects in North America, and outbreaks occur in predictable 30-60 year cycles. The last major outbreak, from 1967 to 1993, covered 136 million acres across Maine and eastern Canada. In Maine alone, this outbreak killed between 20 and 25 million cords of spruce and fir and resulted in hundreds of millions of dollars in lost revenue.

That was over 40 years ago. The industry has had four decades to prepare for this entirely foreseeable event.

What Is “Sustainable” Forestry?

The term “sustainable forestry” has been wielded like a marketing slogan by Maine’s timber industry for decades. But what does sustainability mean if an industry cannot sustain itself through natural, predictable cycles without turning to taxpayers for rescue?

There are only a few possible explanations for why these companies need government bailouts:

First possibility: These companies have adequate capital reserves but are seeking government funding anyway—a classic case of privatizing profits while socializing costs. This represents a failure of corporate ethics and a moral hazard that rewards poor financial planning.

Second possibility: Forest landowners have been extracting irresponsibly high profits over the past 40 years without setting aside reserves for long-term costs. In any other industry, we would call this what it is: financial mismanagement. When a company fails to retain sufficient earnings to deal with predictable operational challenges, it is undercapitalized and poorly managed.

Third possibility: Too much capital was reinvested into land acquisition, infrastructure, and plantations, artificially inflating Annual Allowable Cut (AAC) levels to unsustainable levels. If the entire scale of Maine’s forest industry depends on taxpayer subsidies to survive natural forest cycles, then the industry’s economic foundation is fundamentally unsound.

Without public access to private financial records, there is no way to know the exact circumstances, and we are left to speculate. However, none of these scenarios reflects well on an industry that claims to practice “sustainable” forestry.

Maine Already Has the Infrastructure: The Commercial Forestry Excise Tax

Here’s what many Mainers may not know: we already have a taxation model designed to internalize public forestry costs. The Commercial Forestry Excise Tax (CFET) is imposed on owners of more than 500 acres of commercial forest land to “partially offset the costs of forest fire protection expenditures.” The state collects approximately $2.5 million annually from about 750 accounts covering over 9 million taxable acres.

The infrastructure is already in place. The precedent exists. What Maine needs is simply to expand this model to address spruce budworm management.

A Spruce-Fir Excise Tax: The Solution

I propose that Maine establish a Spruce-Fir Management Excise Tax, modeled directly on the existing CFET structure. Here’s how it would work:

Structure: The tax would be assessed on commercial forest landowners, scaled according to the percentage of spruce and fir in their holdings. Townships with higher concentrations of vulnerable species would pay proportionally higher rates—a system that reflects actual risk and cost exposure.

Revenue Purpose: Funds would be dedicated to a spruce budworm management reserve, used for monitoring, early intervention spraying, and research into long-term forest health strategies. During endemic periods, the fund would accumulate interest. During outbreak periods, it would be deployed without requiring emergency appropriations from state or federal governments.

Rate Setting: Rates would be set by township based on spruce-fir composition data already collected by the Maine Forest Service. This creates a direct relationship between risk and cost—exactly how insurance markets function in every other sector.

Long-Term Sustainability: By requiring landowners to internalize the true costs of managing spruce-fir forests, this tax would incentivize more balanced forest composition. Over time, we would expect to see landowners diversify their holdings toward more resilient mixed-species forests, reducing both vulnerability to budworm outbreaks and the need for intensive intervention.

This is not a novel concept. It is exactly how sound financial management works: you anticipate foreseeable costs and set aside reserves to meet them. The fact that Maine’s forest industry failed to do this over the past 40 years does not make it the public’s responsibility to cover their shortfall.

The Moral Hazard Problem

Every bailout creates a moral hazard. When an industry knows that governments will step in during crises, there is no incentive to plan prudently. Why maintain expensive reserve funds when taxpayers will cover the bill?

The spruce budworm spraying program is textbook moral hazard. It rewards decades of financial mismanagement and creates an expectation of future bailouts. If left untreated, budworm could spread to more than 6 million acres—nearly half of Maine’s forests—with potential losses of $794 million and 3,865 jobs. These dire projections are being used to justify public subsidies. But whose responsibility is it to manage these risks?

If private landowners profit from timber harvest during good years, they must also bear the costs during predictable bad years. This is not an exotic financial instrument or regulatory burden—it is basic business planning.

An Alternative: Equity Stakes for Public Money

If Maine declines to implement a spruce-fir excise tax, there is an alternative principle that must be enforced: no public money without public equity.

If forest landowners cannot or will not maintain adequate reserves to deal with predictable natural phenomena, and they require public bailouts to protect their assets, then taxpayers deserve an ownership stake proportional to their investment. This is how private capital markets work when a struggling company needs rescue financing. Public capital should operate no differently.

Under this model, any company receiving state or federal funds for spruce budworm management would be required to issue equity shares to the state of Maine proportional to the assistance received. This ensures that if these companies return to profitability—as they inevitably will after the budworm cycle passes—Maine taxpayers share in those gains, just as they shared in the costs during the difficult period.

This approach is not punitive. It is fair. It aligns incentives correctly: companies would have strong motivation to maintain their own reserves rather than cede ownership to the state. And if they truly cannot weather predictable natural cycles without public assistance, then the public deserves a permanent stake in their future success.

The Path Forward

Maine’s forest industry is at a crossroads. The spruce budworm crisis has exposed what many suspected: the current model is not financially sustainable without ongoing taxpayer subsidies. We can either continue down this path—socializing costs while privatizing profits—or we can reform the system to ensure that those who profit from Maine’s forests also bear responsibility for their long-term health.

A Spruce-Fir Management Excise Tax would:

1. Internalize long-term costs that are currently externalized to taxpayers
2. Utilize existing infrastructure from the Commercial Forestry Excise Tax system
3. Incentivize forest diversification and more resilient management practices
4. Eliminate moral hazard by ensuring companies maintain adequate reserves
5. Promote genuine sustainability by requiring industry to plan for predictable natural cycles

The question is not whether Maine’s forests need protection from spruce budworm. The question is who should pay for that protection. Should it be Maine taxpayers, who see no profit from timber harvest? Or should it be the landowners who have extracted value from these forests for decades while failing to set aside reserves for entirely predictable management costs?

The answer should be obvious.

Common Sense

The spruce budworm spray program bailout has called into question the entire financial foundation of Maine’s forest industry. The industry’s inability to weather a foreseeable, cyclical natural event without emergency government assistance reveals either financial mismanagement, deliberate cost externalization, or both.

Maine must implement measures to ensure these costs are properly internalized going forward. A Spruce-Fir Management Excise Tax—or alternatively, mandatory equity stakes in exchange for public assistance—would restore financial accountability to an industry that has demonstrated it cannot or will not manage its own long-term risks.

This is not about punishing the forest industry. It is about creating a genuinely sustainable model where those who profit from Maine’s forests also bear responsibility for their long-term health. Anything less is not sustainability—it’s just another bailout waiting to happen.

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The views expressed in this op-ed are those of the author and do not necessarily reflect the positions of any organization or entity.