With budget proposal, LePage calls for pension savings, more education spending

Posted Feb. 10, 2011, at 1:10 p.m.
Last modified Feb. 10, 2011, at 6:59 p.m.
Gov. Paul LePage unveils his two-year state budget to a joint session of the Maine Legislature on Thursday.
Joel Page | AP
Gov. Paul LePage unveils his two-year state budget to a joint session of the Maine Legislature on Thursday.
Gov. Paul LePage greets legislators as he prepares to announce his two-year state budget to a joint session of the Maine Legislature on Thursday.
Joel Page | AP
Gov. Paul LePage greets legislators as he prepares to announce his two-year state budget to a joint session of the Maine Legislature on Thursday.
Gov. Paul LePage unveils his two-year state budget to a joint session of the Maine Legislature on Thursday.
Joel Page | AP
Gov. Paul LePage unveils his two-year state budget to a joint session of the Maine Legislature on Thursday.

AUGUSTA, Maine — Calling it a “jobs bill” rather than a budget, Gov. Paul LePage unveiled the highlights Thursday of a 2-year spending plan that proposes changes to welfare and the state retirement system while cutting taxes and increasing education funding.

LePage will not release until Friday the details of his eagerly anticipated budget proposal. But in a speech to lawmakers, the Republican sketched out a plan that he said encourages private sector growth while restoring fiscal order to state spending and debt levels.

“It is a lot more serious than anybody is willing to give credit,” LePage said. “That’s the bad news. The good news is we have the will, the power and the desire to work with the Legislature to solve this problem.”

The governor also highlighted for lawmakers what they wouldn’t find in his plan: no new taxes, mass layoffs of state workers or additional borrowing, including bond packages. Administration officials estimated total spending in the 2-year plan at $5.6 billion, roughly equivalent to the current budget.

“It is going to be painful,” he said, “but we need to do it if we are ever going to get our house in order.”

While praising LePage’s commitment to increase education funding, Democratic lawmakers and progressive groups expressed concerns about his proposals to ask retired state employees to shoulder more than $500 million of his plans and his stance against bonds for capital improvement projects.

Some Democrats also criticized the governor’s speech as containing too few specifics and too many political soundbites meant to appeal to his conservative base.

“The budget is a complex math problem … but we don’t know anything more than a couple numbers that he threw out,” said Sen. Justin Alfond of Portland, the Senate assistant minority leader. “And that’s troubling because he threw out a lot of rhetoric and a lot of campaign messages.”

Indeed, LePage’s budget address echoed with many of the themes heard during his campaign to the Blaine House: welfare reform, wasteful spending, over-taxation and a debt load that threatens to undermine the state’s long-term economic health.

The governor announced a proposal to reduce the top income tax rate from 8.5 percent to 7.95 percent, lowering the tax burden for more than 240,000 Maine families. The top tax rate currently applies to individuals earning more than $19,950 annually and joint filers earning more than $39,950 a year.

Additionally, LePage is proposing to increase the personal exemption and standard deduction amounts, eliminate the so-called “marriage penalty” and increase the “death tax” exemption to allow families to pass down businesses to future generations.

“We need to address these issues if we are going to bring prosperity to Maine, if we are going to get the job creators to create good jobs,” he said.

Those proposals received roaring applause and a standing ovation from GOP lawmakers but a much more muted reception from their Democratic colleagues.

Several Democrats pointed out afterward that their party not only held the line on broadbased taxes at a time when many states were raising taxes but also passed a reform package that reduced the top rate for most Mainers even more than LePage is proposing. That package was defeated in a statewide referendum last year.

“Democrats have been pushing for comprehensive tax policy changes for a long time,” said House Minority Leader Emily Cain, D-Orono.

LePage also offered up a bleak assessment of Maine’s debt load, suggesting that if Maine were a private company the state would be headed for Chapter 11 bankruptcy.

Like many states, Maine faces a sizeable deficit in its pension fund for state workers. More details are expected to be released Friday on how LePage hopes to help close that estimated $4.4 billion unfunded liability.

On Thursday, he said state retirees should help share the sacrifices of current employees by forgoing cost of living increases for several years — on top of the current 2-year freeze — and accept more modest increases in the future.

LePage said his plan would generate $524 million in savings over the biennium and reduce the long-term pension liability by $2.5 billion and retiree health liability by nearly $1 billion.

But he said the state has an obligation to keep its promises to former state workers.

“They have planned on a public pension to sustain their retirement and we cannot abandon them,” he said. “If we don’t address the problem now, we are, in fact, abandoning state employees. We need to fix this problem now.”

Senate President Kevin Raye, R-Perry, credited LePage for laying out “his vision for how Maine can move forward in a positive direction.”

“Together, the governor and the Legislature have a responsibility to help ensure a more stable future by acting now to make the hard decisions necessary to reduce Maine’s debt burden and preserve and strengthen Maine’s unsustainable pension system,” Raye said in a statement.

Democrats responded, however, that Maine’s strong credit rating undercuts LePage’s gloomy predictions. They also pointed out that Democratic Gov. John Baldacci and the Democrat-controlled Legislature faced even bigger revenue shortfalls yet balanced a budget.

And Chris Quint, executive director of the Maine State Employees Association, said the union is concerned about the reduction in the cost-of-living adjustment for retirees living on a fixed income.

“We’re gravely concerned that the governor has chosen to look reduce the unfunded liability on the backs of retirees alone,” Quint said. “We really would advocate a more comprehensive approach.”

In the area of welfare reform, LePage is proposing a 5-year lifetime cap on benefits as well as to eliminate instant eligibility for welfare for legal non-citizens. At the same time, the governor said he is determined to protect the elderly, veterans, the disabled and people with mental illness.

“We are going to take care of them while moving the state forward,” LePage said. “And those who can work, we will simply ask them to get a job.”

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