Friday’s meeting for state commissioners to introduce the LePage administration’s two-year budget to legislative leaders was sincerely depressing. Each head of Maine’s major state agencies, in turn, listed the cuts they believe are necessary to balance out revenue forecasts.
There was a collective intake of breath in the State House cabinet room when Finance Commissioner Sawin Millett aired the biggest proposed cut: the two-year suspension of the state’s municipal revenue sharing program, which directs a portion of state sales and income tax collections to Maine’s cities and towns to ease the burden on property taxpayers.
Gov. Paul LePage wants to suspend the monthly payments to municipalities for two years to save the state $98.9 million each in fiscal years 2014 and 2015. It is clear that if the budget-writing Appropriations Committee and full Legislature approve the cuts, it will pass the costs onto communities and cause extreme hardship. If towns and cities do not want to eat the cuts by reducing personnel such as firefighters and policemen, they will have to raise property taxes.
It’s unlikely the Democratic Appropriations Committee members, who hold the majority, will tell their hometowns they plan to eliminate this critical source of funding. Some Republican legislators, like Sen. Roger Katz, R-Augusta, have already rightfully opposed the possible revenue-sharing suspension. And in 2011 the Republican-led Legislature rejected an attempt by LePage to reduce payments to municipalities.
But the governor has made his message of belt tightening clear by starting off with such extreme cuts. He now places the burden on the Legislature to find an alternative. No one should envy their task.
It’s not just the revenue-sharing suspension that would harm people who pay property taxes. The LePage administration’s budget would also eliminate the homestead property tax exemption and circuit breaker program for everyone except people older than 65 and veterans. Both programs provide property tax relief for a significant number of middle- and low-income Mainers. Nearly 200,000 households qualified for the circuit breaker program in 2011. Lawmakers must now ask: Will eliminating property-tax relief at a time when property taxes are expected to rise only send the state further into a downward spiral?
One proposal will require further study, but it holds promise: Making property located at a retail sales facility no longer eligible for tax relief through the Business Equipment Tax Reimbursement or Business Equipment Tax Exemption programs. In September, the Maine Center for Public Interest Reporting compiled a list of 44 Fortune 500 companies that received checks from Maine’s BETR program. Well-capitalized Walmart, for example, was reimbursed $1 million in property taxes in 2010. We doubt the international company needed the tax break to buy equipment. Stopping the tax benefit for retailers will prevent some property tax loss for service-center municipalities, which typically have a large number of retailers.
Compared to the overall budget, education funding fares fairly well, though one big battle will be waged over whether school districts should partially fund their teacher pensions. The state currently pays 100 percent of the retirement costs. Will the Maine Education Association yield any ground on current employees’ pensions in return for funding for students? The governor is requesting extra money for some worthy programs, such as Jobs for Maine’s Graduates, which is shown to boost the number of students enrolling in education after high school, and the Early Study-Aspirations program, which allows students to gain college credit while still in high school. And he is promising to fund initiatives required by legislation passed last session, such as a requirement for schools to implement teacher- and principal-evaluation systems. The proposed education budget is workable.
The major cost driver for the state budget is the Department of Health and Human Services. There is no doubt that keeping spending in line for Maine’s largest state agency will cause pain for many of Maine’s vulnerable populations. Capping General Assistance to towns and cities at $10.1 million and eliminating the state-funded Drugs for the Elderly program probably have a slim chance of passing as they’ve been proposed. But expanding initiatives aimed at cutting expenses associated with the 5 percent of MaineCare members who account for 54 percent of the program’s costs have potential. LePage also wants to provide funding to reduce wait lists for people with severe intellectual and developmental disabilities, which the Legislature will likely fund.
We appreciate the way LePage has clearly laid out a cost-cutting path. But many line items likely won’t pass a Democratically led Legislature. And many proposals are misguided because they will only increase burdens at the local level. The two-year, $6.3 billion budget does show, however, that LePage is trying to prioritize students. As the Legislature begins its Herculean job of balancing spending within available revenues, may they keep in mind long-term effects, think creatively about ways to boost revenue and prioritize the needs of low- and middle-income Maine residents.