LePage budget proposes spending increases, changes for state workers, welfare

Posted Feb. 11, 2011, at 2:35 p.m.
Last modified Feb. 11, 2011, at 9:24 p.m.

AUGUSTA, Maine — The LePage administration on Friday released the details of a two-year spending plan that is larger than the current budget but proposes long-term changes to the state’s retirement system and welfare programs.

LePage’s budget proposal totals $6.1 billion, which is roughly $300 million more than the current budget designed by Gov. John Baldacci and the Democrat-controlled Legislature.

Finance Commissioner Sawin Millett described the spending blueprint as a “jobs budget” that is “designed to keep money in the pipeline” for taxpayers and businesses. But due to changes in the way the state shares $180 million in tax revenue with municipalities, Millett said, the two budgets are essentially the same.

“When you look at an apples-to-apples comparison, we are really talking about a budget that is flat-funded but makes a few new investments and makes some strategic [changes] to long-term priorities,” Millett said.

Among the new budget details that emerged Friday are:

  • The state work force, now authorized at 13,737 employees, will shrink by roughly 80 positions, the vast majority of which are already vacant. Of those positions, 50 are within the Maine Department of Transportation.
  • Assistance to municipalities will increase by roughly $90 million over the biennium.
  • Total spending on Medicaid would increase by roughly $80 million in part because of additional demand.
  • From the Fund for Healthy Maine — a program that uses tobacco company settlement payments for health and wellness initiatives — $18 million will go toward Medicaid, eliminating funding altogether for some programs within the fund.

But LePage’s budget also proposes $63 million in new spending on K-12 education and contains no cuts to higher education, essentially flat-funding the system of public colleges and universities.

The administration’s budget also contains a number of tax cuts, many of which would conform Maine’s standards and exemptions to the federal tax code. LePage has proposed reducing the state’s top income tax rate from 8.5 percent to 7.95 percent.

Arguably the biggest changes in the budget are to Maine’s pension and health coverage systems for state retirees.

As outlined during a speech Thursday, LePage is recommending that the retirement age for most state employees increase from 62 to 65. He also has proposed continuing the freeze on cost-of-living adjustments for current retirees and capping future increases at 2 percent, down from the current maximum of 4 percent.

Additionally, state employees would be required to contribute another 2 percent from their paychecks toward the pension system to help pay down the estimated $4.4 billion unfunded liability. State workers currently chip in 7.65 percent of their salary to the pension system.

“I think it is important that we look at these changes being proposed not as taking money away from people, because frankly we are not,” Millett said. “But we are doing what we can to invest in structural changes now that will ensure the plan will be there for future retirees.”

Millett pointed out that the budget plan does not include the 10 unpaid furlough days included in each year of the current budget, which he said resulted in a net 4 percent reduction in pay for state employees. But state workers will still be unable to receive pay increases based on merit or longevity.

In the area of welfare reform, Department of Health and Human Services Commissioner Mary Mayhew said spending has increased due to additional enrollment in Medicaid programs during the recession as well as changes at the federal level.

LePage has proposed a five-year lifetime limit on receiving welfare benefits, which is consistent with federal policy. Mayhew said requiring that legal noncitizens live in Maine for at least five years before receiving welfare — or eliminating so-called “instant eligibility” — would save $19.5 million over the biennium.

Mayhew estimated that 2,500 people would be affected by the change in instant eligibility, although federal rules prohibit denying benefits for children and pregnant women.

But advocacy groups expressed concerns that the proposed cuts to MaineCare — the state’s Medicaid program — and the Temporary Assistance for Needy Families program, or TANF, could hurt the very groups the governor is pledging to protect.

Sara Gagne-Holmes, executive director of Maine Equal Justice Partners, pointed out that a recent, yearlong study of TANF participants found that the typical beneficiary is a single mother with two children.

Holmes, whose group advocates for low-income Mainers, said the budget also makes drastic cuts to the Drugs for the Elderly program.

“In his budget address on Thursday, Governor LePage said he would defend older Mainers, those suffering with disability and those fighting mental illness with every ounce of his being,” Gagne-Holmes said in a statement. “Our research shows that, along with children, those are the people who are protected by assistance programs such as TANF, MaineCare and Drugs for the Elderly.”

Administration officials gave a presentation to legislative leaders and their staff on Friday before meeting with reporters. House Minority Leader Emily Cain, D-Orono, said the more she hears, the more questions she has.

“The governor has continued to roll out the pieces that he believes are the most exciting and most interesting, but he has not rolled out all of the ways that he pays for these initiatives,” Cain said. “So the devil will be in the details.”

Cain said she worries that taking $18 million from the Fund for Healthy Maine for Medicaid programs could hurt the state’s successful health, wellness and prevention programs.

Senate President Kevin Raye, R-Perry, said he was impressed with what he has heard.

“I was impressed that even in difficult times, it does not target cuts to the most vulnerable,” Raye said. “It does not target the elderly, the disabled and those with mental illness. That is a refreshing change from what we’ve seen in past budgets.”

Raye said he also was pleased that LePage wants to address the “800-pound gorilla” of the state’s unfunded pension liabilities.

But Raye said there likely will be considerable discussion in the Legislature about the fact that LePage has said he would not support any new bonds. Lawmakers from both parties have introduced a number of bond package proposals.

“I think that still has to play out,” Raye said. “I want to review that part of the budget to make certain that we can make vital investments that we need to make in our transportation infrastructure, particularly.”

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