McKernan's second term became defined by partisan battles with the state legislature's Democratic majority over fiscal management, given a large budget deficit and a constitution that prohibited borrowing to offset budget gaps. He threatened to invoke a 1976 law permitting the governor to make "fair and equitable" spending reductions to comply with the state's balanced-budget mandate. His specific controversial actions included drafting plans to cut spending unilaterally and rewriting rules to give state agencies more discretion in how they allocate their reduced funds. Democrats objected and took McKernan to the Maine Supreme Judicial Court, but the court upheld the governor's authority to take such action.