Maine lawmakers are expecting a windfall of excess tax revenue in the next two years and are mulling over plans to spend the money.

Gov. Janet Mills' administration says the state's general fund revenues are up $822 million or 9.7% for fiscal years 2022 and 2023 compared to initial projections in the biennial budget. Mills is looking at using the additional revenue "to provide direct financial relief" to those hit hard hit by the pandemic.

But on Tuesday, members of the Legislature's Appropriations and Financial Affairs Committee heard from state finance officials who cautioned that the pandemic recovery remains uneven and warned that the economic outlook remains murky.

Michael Allen, chairman of the state’s non-partisan Revenue Forecasting Committee, said the state is on firm financial ground but there is uncertainty about the future of the economy amid rising COVID-19 infections and the emergence of new and highly contagious strains of the virus.

“We can’t forecast the pandemic, which makes forecasting the economy even more difficult,” he told the panel. “We’re in a volatile environment.”

Amanda Rector, the state’s economist and revenue committee member, echoed those concerns and said other factors, including rising inflation rates, could impact the state's economic recovery.

"There is a risk of continued inflation in 2021 and 2022," Rector told the panel. "Interest rates are expected to increase sooner than previously anticipated."

Allen pointed out that the state’s revenue forecast will need to be revised if President Joe Biden‘s build back better plan is approved by Congress. The legislation, which was approved by the House of Representatives, would provide states with more money for health care and social safety net programs.

Republican lawmakers want to use the excess tax revenue to provide tax breaks and have argued against putting the one-time funds into programs that will require ongoing revenue.

Last month, House and Senate GOP leaders floated a proposal for $300 million in income tax relief for individuals who worked during the pandemic. The plan called for providing a tax cut for 2020 by exempting an additional $10,200 in income from state income tax.

“Energy costs are skyrocketing, home and auto fuel prices are the highest they’ve been in eight years, and inflation for consumer goods and basic necessities is growing at the fastest rate since 1990,” the GOP lawmakers wrote. “We will not support giving people’s money back to them through the special interest, advocacy groups and lobbyists who frequent Augusta.”

In July, Mills signed a two-year, $8.5 billion budget that includes pandemic "hazard" payments to workers and a historic level of school funding.

A key provision of the proposal includes $187 million to meet the state’s obligation to pay 55% of local education costs, which was mandated under a previous state law.

The plan also includes $275 one-time "hazard" payments for workers earning less than $75,000 per year, or joint filers making less than $150,000, who worked during the pandemic. The state began sending out those bonus payments last month.

Maine officials say a range of factors, including low interest rates, federal stimulus and increased consumer activity, have improved the state's economic outlook.

Mills is expected to unveil her proposed supplemental budget before lawmakers reconvene in January.