AUGUSTA, Maine — Municipal revenue sharing, property tax relief and infrastructure may be among the crucial but few places where Democrats and Republicans agree as they head into more Maine budget talks, bolstered by rosy revenue figures and an influx of federal money.
Gov. Janet Mills, a Democrat, will release a plan on Tuesday to spend $1.1 billion in aid coming to the state through the American Rescue Plan Act. It will be followed by separate but connected plans to adjust a two-year budget and a borrowing package. All of them will be buoyed by a recent upward revenue projection of more than $920 million over two years.
The race is on to stake a claim to the money. Minority Republicans, who were circumvented when Democrats passed their $8.3 billion along party lines, released a list of priorities late Friday that included income tax cuts and more traditionally Democratic goals of boosting aid to cities and towns. Democrats have not countered yet, but Mills has indicated a desire to tackle transportation and broadband infrastructure and spend more on health care and education.
Top legislative Democrats were open on Monday the idea of going along with revenue sharing and property tax relief. But there will likely be friction as Republicans look to constrain spending and Democrats see the money as a historic chance to change government.
“This is once in a lifetime,” said House Speaker Ryan Fecteau, D-Biddeford. “I don’t know if we’ll see this kind of investment for our state and for the Maine people again.”
Republicans have largely looked to rein in spending during Mills’ tenure, but their proposal contains few cuts. It has a bump in revenue sharing from 3.75 percent to 5 percent, an increase in the homestead exemption and more spending dedicated to items from nursing homes to a sales tax holiday for businesses affected by the pandemic. They also endorsed a proposal to provide a tax break on $10,200 in income for those who have worked during the pandemic.
Senate Minority Leader Jeff Timberlake, R-Turner, said his party also wants to use the influx of money to take care of one-time projects like roads and broadband investment. He did not put a parameter on who would get the income tax relief, saying all workers are “essential.”
“We saw it as, ‘How can we get money back to the people and help the state at the same time?” he said.
There are hurdles to these cuts. The U.S. Treasury has said states can cut taxes and still receive American Rescue Plan Act funding, but those funds cannot be used to pay for tax cuts. The Republican package could also cost between $305 million and $345 million, said Kelsey Goldsmith, a spokesperson for Mills’ budget department, taking up most of the state’s expected revenue boost for this year. Democrats are likely to want to spend more.
Their leaders did not dismiss tax relief this week but were skeptical of doing it without narrow targeting. Fecteau said the influx should be focused on childcare, health care, housing and education funding to ensure the state recovers from the pandemic.
While both sides look to be willing to work together, Democrats were miffed Republicans had put forward a proposal without talking to them first. Sen. Cathy Breen, D-Falmouth, who co-chairs the Legislature’s budget committee, called the Friday release “mysterious,” but that nothing in it surprised her.
She said the finer details would have to be worked out in committee, but that she could not imagine just doing across the board income tax breaks to the many Maine folks and businesses who have progressed quite normally and switched over to remote operations. To her, the proposal lacks an obvious connection to the pandemic-related aid.
“It seems a little bit random to me,” she added.
Mills spokesperson Lindsay Crete said the governor “appreciates” the Republican proposal and would review it as she crafts her own. She did not offer a timeline on when to expect the proposals.
For his part, Timberlake said the items in the proposal were meant as an “olive branch” to move on from March’s difficult discussions and establish Republicans’ starting point.
“Are we going to get them all? Nope,” he said. “But hopefully we’ll find some common ground.”