AUGUSTA, Maine — The parades of special interests through State House committee rooms to speak out about Gov. Paul LePage’s two-year budget proposal are over, with the onus shifting to a divided Legislature to hammer out a deal.
The last scheduled public hearing before the Legislature’s budget-writing committee on the Republican governor’s $6.8 billion proposal occurred Friday. Other committees will consider items in their subject areas before reporting back to the Appropriations and Financial Affairs Committee.
It’s certain to lead to massive changes to LePage’s aggressive budget plan, which would shift Maine to a flat income tax by 2020 while neutering a voter-approved increase on high earners, overhaul the state’s K-12 education system and cut $140 million over baseline figures from the Maine Department of Health and Human Services, among myriad changes big and small.
Here are some of the big pressure points and where legislative leaders are lining up before any grand bargain.
Republicans may be seeking a new tax tied to increasing education funding. LePage might even accept it. But Democrats could be an obstacle.
Maine voters created a new income surtax to benefit public schools by passing Question 2 on last year’s ballot, which placed a 3 percent surcharge on income over $200,000 to increase school funding by an estimated $157 million per year in an aim to get the state to fund education at or near 55 percent — a threshold set by voters in 2004 that Maine has never met.
LePage and Republicans already are intent on repealing or softening the impact of the new tax. But Democrats are holding to it for now, with House Speaker Sara Gideon, D-Freeport, saying funding schools at less than 55 percent is a “dealbreaker” for Democrats.
“I’m really not in a position, quite honestly, where I’m approaching our budget negotiations ready to change that or give it away,” she said.
Senate President Mike Thibodeau, R-Winterport, said support is building for implementing a sales tax on goods Mainers buy online and routing the proceeds to public schools.
“In order to find the necessary votes to pass this budget, we’ve got to honor the spirit of what that referendum was, which is that the people want additional resources for education,” he said Friday. “The controversial part isn’t the additional funding for education. There are folks on both sides of the aisle that recognize an income tax rate double what the state of Massachusetts has is just untenable.”
House Minority Leader Ken Fredette, R-Newport, half agreed with Thibodeau and suggested that education doesn’t need an increase in funding past the $19 million increase proposed by LePage — it needs reform.
“For House Republicans, the focus is going to be holding the line on spending,” Fredette said, referring to education as well as the rest of the state budget. “The answer can’t be, ‘Let’s find another $150 million, and let’s throw it at education.’ Then you have another budget increase of $300 million in spending. That’s going to be a real challenge.”
The governor is a tax hawk, but he has long supported an online sales tax, which is supported by small retailers as a way to level the playing field between brick-and-mortar stores and massive online outfits such as Amazon, which collects sales taxes in 38 states but not Maine.
Such purchases already are subject to Maine’s use tax, but that’s easily avoided because reporting out-of-state purchases is effectively voluntary. It’s also unclear whether Maine could do it. LePage signed a law aiming to collect these taxes in 2013, but Amazon cut ties with affiliates here to avoid it, according to the Institute for Local Self-Reliance.
Senate Minority Leader Troy Jackson, D-Allagash, said funding education at 55 percent would deliver property tax relief to Mainers, while the online sales tax may be “pie in the sky” and “something we’re not looking at at all.”
LePage’s welfare reform proposals are sure to trigger a political impasse.
This will be a continuation of a debate that has gone on for at least four years. Citing a need for smaller government, LePage’s administration has proposed eliminating Medicaid eligibility for non-disabled parents with income over 40 percent of the federal poverty level and lower lifetime caps on cash benefits for families.
But those changes would remove an estimated 18,000 Mainers from Medicaid and remove 1,500 children from the Temporary Assistance for Needy Families program on the heels of other cuts to those programs under LePage’s tenure.
Democrats have drawn a bright line on that, with Jackson saying he’s “floored by this type of mentality that we have to basically screw poor people so the wealthiest in our state can get more of their income taxes back.”
“The 90-pound gorilla in all of this is the health and human services budget,” Thibodeau said. “There will be a lot of give and take to find the sweet spot that garners two-thirds support, but I’m sure we can get there.”
Fredette said House Republicans agree with LePage that anyone they define as able-bodied should not receive welfare without significant hurdles in terms of work requirements and asset tests.
“The reason we’re not in a budget crisis today is because the governor and Republicans have been able to reform DHHS and really stop the bleeding over there,” Fredette said.
If the Legislature rejects too many of LePage’s welfare initiatives, it could cause the governor to veto the entire budget, as the issue has been one of his signature agenda items since he took office.
In addition to re-applying for some initiatives that have failed in the past, such as putting photos on cash benefits cards, LePage has inserted himself into the congressional debate about repealing and replacing the Affordable Care Act.
Education and social services — and their billion-dollar price tags — will cause debate, but so will smaller-dollar issues that have been problems for years.
Among those issues is state funding for county jails, which has posed jurisdictional and financial problems for several years. At the core of the disagreement is whether the state, which has little or no oversight over county jails, should fund them at all.
“Everyone knows that the county jail system needs to be fixed,” Fredette said. “We can’t keep writing blank checks.”
Gideon said “we don’t have that solution defined at this point,” saying jails will require a “deep dive” by the Criminal Justice and Public Safety Committee to be discussed in the context of the budget.
Another area that could cause friction is funding for indigent legal services, which serves low-income Mainers. At the core of this debate is whether the state should continue to pay private practice attorneys an hourly rate or whether the state should develop a stable of public defenders. LePage favors the latter — and proposed doing so in 2015 — but so far the Legislature has not followed suit.
Come May and June, it could be deja vu all over again but with one difference — LePage is heading out of office.
It’s perhaps LePage’s last best chance at a legacy, and that seems to be on his mind. He has floated a 2018 run against independent U.S. Sen. Angus King over the past two years and his visits to Washington spurred rumors of a potential role in the Trump administration.
When asked about a Senate run on Thursday by WGAN, LePage said he hasn’t decided. But after a budget passes, he said, “I can start looking and then my wife and I will start talking about what we want to do when we grow up.”
“If they do not take the high taxes and the high energy costs in this state and take it seriously and realize that it’s killing our forest industry because of high need of energy, then there’s no reason why I want to spend the rest of my life in the state of Maine,” LePage said of the Legislature.
There is a lot of time for debate between now and then, but the issues that could hold up passage of the budget — and presumably raise the prospect of a government shutdown if an impasse lasts into late June — look today to center on tax reform, social service cuts and overall spending rates.
The last two state budgets were passed over a governor’s veto. Again, it could be a political fight with LePage and House Republicans on one side and Democrats and Senate Republicans on the other.
Whatever spending plan comes out of the debate will need two-thirds buy-in from both chambers, which is why some say this could be the most difficult budget battle in years, despite a state balance sheet that is decidedly in the black.