It’s a budget problem, not a DHHS problem.
That simple truth should guide members of the Legislature’s Appropriations Committee as they consider Gov. Paul LePage’s proposal to close a $220 million gap in the Department of Health and Human Services budget. Certainly the shortfall is real, and certainly the state can and should consider changing the level of health assistance it provides the needy.
But the governor has defined the problem in very narrow terms, ignoring about $150 million in tax cuts his first budget, signed last year, will provide. Those cuts include a reduction in the top income tax rate from 8.5 percent to 7.95 percent, and a bump in the threshold at which the estate tax kicks in from $1 million to $2 million. Some of the tax changes could be delayed.
Cutting the tax rate is an important step toward rebuilding Maine’s image as a friendly place to do business. But if those cuts come too soon or are so steep as to push 65,000 people off health insurance, they should be reconsidered.
To give an idea of who benefits from the new estate tax policy, consider this advisory on the change from the Pierce Atwood law firm’s website: “Through proper estate tax planning, married couples essentially will be able to shield $4 million of assets from Maine estate taxation, and other techniques may also be used to further reduce the tax burden.” No advice was available on where the disabled and elderly who would lose their rooms at private, nonmedical institutions could live.
A progressive group has urged the Legislature to raise taxes to cover the shortfall, arguing Maine’s wealthiest 1 percent pays an effective rate in state and local taxes that is 12 percent lower than others pay. Restoring tax rates to their 2010 levels for those earning more than $200,000 could generate more than $70 million a year, according to the progressive Maine Center for Economic Policy.
MaineCare eligibility was expanded during the boom times in the late 1990s, an impulse that seemed right at the time. The gap that some of that expanded access and increased need due to the recession caused must be closed now. But the governor may have won more support for his proposed cuts if he also signaled interest in programs that promote better health, which would save funds in the long term, or a willingness to raise the tobacco tax or add another tax that targeted unhealthy food or beverages.
Cutting access to federal Medicaid programs means less money will come to Maine and some jobs will be killed here, further stalling economic recovery. Some of the proposed changes may not be legal. And the avoided costs will be borne by hospitals, towns and others.
The governor’s press secretary called the DHHS budget gap a “financial crisis.” If it is indeed that, broader thinking is needed.
Gov. John McKernan raised the sales tax by 1 percent when his government faced a financial crisis. Such a broad-based tax hike should be avoided. But this moment calls for field dressing the wounds, not amputation. Later, when the economy improves, the governor will get his chance to reconfigure the many assistance programs for which he uses the generic term “welfare.” That is the moment fiscal conservatives must assert their views.