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“Responsible” budget needs more tax increases, spending

AUGUSTA – Maine Democrats are calling the 126th Legislature’s Democrat-backed budget “responsible” — yet again — despite new calls for $40 million in tax increases and an additional supplemental budget. Top Democrats have also assailed $33.7 million in administrative spending cuts — cuts they asked for in their budget.

The Unbalanced Budget

Following the Legislature’s passage of a Democrat-crafted budget over Gov. Paul LePage’s veto, Democratic leaders repeatedly described their budget as “responsible.” Yet the budget was balanced through a combination of immediate tax increases (on sales, meals and lodging), delayed tax hikes delegated to a Democratically-controlled task force, and $33.7 million in promised administrative spending cuts delegated to the Office of Policy and Management. The budget was “balanced” — but only on the promise of new taxes and undisclosed spending cuts which the Legislature refused to make itself. And now Democratic leadership is calling for a supplemental budget to allow them spend even more tax dollars to correct flaws in its unbalanced budget.

$40 Million in Tax Increases

The 126th Legislature’s budget created a tax hike task force — the Tax Expenditure Review Task Force. (The government calls it an expenditure when taxpayers keep more of their money.) The task force, chaired by Democratic lawmakers, is charged with finding $40 million in taxes to increase. This will be done by eliminating tax breaks offered to certain business sectors and classes of individuals. The tax breaks range from the small and narrow — like income tax deductions for the blind, deaf, elderly and disabled — to broader tax preference packages, such as the Business Equipment Tax Reimbursement, the Earned Income Tax Credit, and the sales tax exemptions on home heating fuel and groceries.

According to Democrats, the task force is not raising taxes; rather, it is “closing loop holes” and making the tax code “fair.” Republicans, however, see the exercise as an attempt to extend taxes into classes of goods and services that have never been taxed. If the Legislature rejects the task force’s tax increases, the $40 million will come from revenue sharing transfer payments to municipalities, as proposed in the governor’s original budget.

$33.7 Million in Spending Cuts

The 126th Legislature’s budget delegated responsibility for making $33.7 million or more in administrative spending reductions to the Office of Policy and Management, directed by former state senator Richard Rosen of Orrington. OPM was charged with finding $11.3 million in General Fund savings for FY2014 and $22.5 million in savings in FY2015. (OPM exceeded both of those targets.) Cuts for FY2014 will take place automatically, while the recommendations for FY2015 must first be approved by the Legislature. OPM was also asked to identify up to 100 state jobs for potential elimination. OPM identified all spending recommendations not unilaterally, but in coordination with the various department heads. Despite asking for the recommendations, which were presented on Sept. 30, Democratic leaders are now caterwauling about the spending cuts.

The Supplemental Budget

In addition to a $70 million hole, which must be filled through post-session tax hikes and spending reductions, Majority Democrats now say their “responsible” budget needs an additional, supplemental budget worth $7 million in order to ensure government functions properly.

That Democrats would call for the supplemental budget come January was apparent in June, before the biennial budget was passed. Yet they did nothing to address the $7 million shortfall then and are now chiding LePage, who has vowed not to introduce a supplemental spending package. According to Democrats, it is the governor’s responsibility to “make sure that we have a balanced budget” — something the Legislature effectively blocked by disregarding the balanced budget he proposed in Janaury and subsequently forcing through their own unbalanced budget over his veto.

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