AUGUSTA, Maine — Legislative leaders and members of the Legislature’s Appropriations Committee met through the weekend to review Gov. John Baldacci’s plan announced Friday to close a $569 million budget shortfall and work on alternatives to some of his budget priorities. The public gets its only chance to comment on the proposals today at a hearing that is expected to go into the evening.
“We wanted to give those affected by these proposals a chance to have their say,” Rep. Emily Cain, D-Orono, co-chairwoman of the Appropriations Committee, said during a break in the weekend meetings. She said committee members are getting e-mails from groups and individuals concerned about some of the proposals.
“There are some areas where we will make changes,” she said. “There always are.”
The governor’s plan to freeze income tax brackets at 2008 levels generated several questions, as did an expansion of the Maine Revenue Services authority to go after assets of companies and individuals that owe taxes.
“This says 450,000 taxpayers are affected. Isn’t that just about every taxpayer?” asked Sen. Richard Rosen, R-Bucksport. Mike Allen of Maine Revenue Services said there are about 650,000 tax returns filed every year but many have no tax liability. He acknowledged most taxpayers will pay more in income taxes under the bracket freeze than they would have paid under the current law that indexes income tax brackets every year.
He estimated that on average each taxpayer will pay $18 a year in additional taxes.
The freeze generates about $32 million over three budget years. One complication is new withholding tables will not be issued until after the budget becomes law, and the rates will be retroactive to Jan. 1, so some taxpayers could find out come tax time next year that they may owe taxes because they had not had enough tax withheld.
The standard deduction, used by most taxpayers, also would be frozen at the current level.
“There is a lot of concern in the Republican caucus about the tax items,” Sen. Kevin Raye, R-Perry said. Raye is the Senate GOP leader.
That was echoed by Republican members of the Appropriations Committee. With a two-thirds vote needed to pass a budget that will take effect before the start of the new budget year July 1, the budget will need some Republican support to pass.
“We see too much in one-time solutions in this budget,” Rep. Sawin Millett, R-Waterford, said. “We are going to look to see if we can find more structural changes that will save going forward into the next biennium.”
Lawmakers also were concerned about tax shifting in the governor’s proposal. In addition to the loss of municipal revenue sharing because of the decrease in sales and income taxes, the governor is proposing another $12.4 million be cut from the program over two years. That could lead to property tax increases.
Concerns also were raised at language that would force all banks and credit unions in the state to link electronically to an independent contractor of Maine Revenue Services for asset searches. Maine Revenue Services argues that while it has the authority now to ask a financial institution if a person has an account with it them, it is a paper process and can miss assets.
“This is the way this is going across the country,” Jerome Gerard, Maine Revenue Services acting executive director, said. “What we do now is a scatter gun approach; this will be more focused and effective.”
But Rep. Peggy Rotundo, D-Lewiston, worried the language is too expansive and the system lacks independent oversight of its use. Gerard said the authority is carefully monitored by managers and believes the attorney general and the courts also provide independent oversight.
Gerard was also sharply questioned on Sunday about estate tax provisions Maine Revenue Services had proposed to collect taxes it believes the state is owed.
“What you are proposing is open-ended, there is never closure to the estate,” Rosen said. Gerard responded the panel could set a limit on how long Maine Revenue Services has to audit an estate so there would be closure.
The tension in the room was broken when Rep. John Martin, D-Eagle Lake, said while he didn’t like many of the estate tax provisions, he did not have a better solution.
“I would rather tax dead people than live people,” he said.
There was also controversy over proposals in the Department of Health and Human Services budget. Commissioner Brenda Harvey predicted hundreds of service providers will protest the cuts proposed for private nonmedical institutions that provide services to children with serious behavioral problems. Maine’s costs are averaging $158,000 a child per year. The proposal would reduce that to $107,000 per child per year, saving about $9 million a year.
“People are going to say they can’t provide services for this rate,” she said, “but we can’t afford the cost.”
Rep. Anne Perry, D-Calais, the co-chairwoman of the Legislature’s Health and Human Services Committee, said reducing to a single, flat rate will not work. She said some children need more extensive care, which is costly.
“We should look at a tiered system,” she said. “We can save the same amount of money, but recognize some of these kids that can’t be out in the community need more care than others.”
Baldacci’s proposal to use $2 million to help create an Educare center in Waterville drew sharp criticism from members of both parties. The money would be used, along with private funding, to build a model facility aimed at helping low-income children up to age 5.
“Where did this come from?” asked Martin. “Is this model then going to be used across the state and how do we pay for that? I mean if we are going to have one in Waterville, why not one in Aroostook County?”
The matter was tabled for later consideration.
In an interview, Baldacci said he had not included any cuts in either the Legislature or the courts because they are separate branches of government. But he said he expected they would propose cuts of their own.
“We are working on a list of cuts,” said House Speaker Hannah Pingree, D-North Haven, the chairwoman of the Legislative Council. “I expect we will follow along with what the governor has proposed for the executive branch for shutdown days and freezing merit pay.”
Forcing legislative workers to take 12 days a year off without pay will save about $1.3 million over the two-year budget. Freezing merit pay will save an estimated $667,000.
In a telephone interview, Chief Justice Leigh Saufley said she has discussed the state’s latest financial downturn with the governor.
“We are looking hard to find further places to cut,” she said, “but we have already cut so much. We can’t simply follow the governor’s lead on shutdown days; we have constitutional issues.”
Under the plan for the executive branch, many existing three-day weekends would be extended by another day.
Saufley said someone charged with a crime has a right to be promptly arraigned before a judge and a four-day wait is too long.
The panel hopes to have a budget crafted and passed by midmonth to avoid a delay in payments to providers of Medicaid-funded services. That is when the money to pay those bills runs out.