AUGUSTA — Democratic lawmakers unveiled a list of budget priorities Thursday that they said would provide the largest tax break in state history while “fully funding” Maine’s public schools.
But the proposal was immediately dismissed by Republican leaders who said they will “accept nothing less than a repeal” of the voter-approved tax hike on wealthy Mainers that is key to the Democrats’ education funding plan.
The dueling press conferences show that the two caucuses remain far apart – politically and economically – on their budget priorities as the clock ticks on the legislative session. Lawmakers have less than three months to agree on the complex details of a roughly $7 billion, two-year budget before triggering a state government shutdown. To date, they have yet to make substantial progress resolving the largest impasse: whether to keep the 3 percent tax surcharge on earnings over $200,000 that voters approved in November as a way to increase education funding.
“I don’t see a path to a budget without dealing with that issue,” said Senate President Mike Thibodeau, R-Winterport. “That is going to be so devastating to Maine’s economy.”
Democratic leaders said their “Opportunity Agenda” counter-proposal to Gov. Paul LePage’s $6.8 billion budget would:
n Achieve 55 percent state funding for state schools by funneling an additional $370 million to education, thereby lowering the property tax burden on municipalities.
– Provide additional property tax relief by increasing “revenue sharing” for municipalities from its current 2 percent to 3 percent while increasing the Homestead tax exemption from $20,000 to $30,000.
– Build or repair roads, bridges and the broadband internet infrastructure through additional bond measures.
– Earmark $55 million for “direct care worker reimbursement” to improve wages for those working in nursing homes, assisted living facilities or home care.
– Provide $5 million for as-yet-undetermined efforts to combat Maine’s worsening opioid addiction crisis.
“The ‘Opportunity Agenda’ that we present to you today is a transformational plan for Maine’s economy,” House Speaker Sara Gideon, D-Freeport, said in a press conference announcing the priorities. “It pulls people together and it puts Maine families first. Our budget does cover current services and it also makes new investments in our state and our people. We do this while rejecting unnecessary cuts that are in the current proposed budget and we do it without proposing to raise another tax dollar.”
The proposed spending in the Democratic proposal would push Maine’s two-year budget above $7 billion. To pay for the initiatives, Democrats are counting on an additional $181.5 million in tax revenues from Maine’s growing economy, $13.2 million in revenue from taxes paid on recreational marijuana products and $70 million in previously uncollected taxes from Amazon and other online purchases – figures Republicans said were inflated. It also hinges on the 3 percent tax surcharge remaining in place.
In his budget proposal unveiled in January, LePage wants to cut income and corporate taxes, reduce the state workforce by 500, further reduce welfare rolls and fundamentally change the state’s education funding formula. He also proposed nullifying the 3 percent surcharge on wealthy Mainers by setting the top tax rate at 7.15 percent this year, down from the current 10.15 percent on earnings above $200,000. And by 2020, all taxpayers would be paying a flat tax of 5.75 percent under LePage’s plan.
Many aspects of LePage’s budget were considered “dead on arrival” with Democrats.
“In almost every imaginable way, the governor’s budget serves the interests of the wealthy and the powerful while leaving the rest of us in the dust,” said Sen. Troy Jackson, D-Allagash, the Senate minority leader.
And the Democratic proposals didn’t fare much better Thursday with Republicans.
“What we have here is, in my opinion, more spending and more promises as to how (Democrats) are going to make Maine better again,” said House Minority Leader Rep. Kenneth Fredette, R-Newport. “But quite frankly, how do you pay for it? How do you pay for it and what do you get with your money?”
“Make no mistake: they are growing the size of government in this report and we simply can’t do that without consideration to the taxpayer,” said Thibodeau.
As expected headed into the legislative session, the 3 percent tax surcharge is emerging as the biggest political sticking point. While supporters contend voters clearly supported higher taxes on Maine’s wealthy to pay for education programs, LePage and Republican opponents said the 10.15 percent tax rate – the highest in the nation – will only drive successful people or businesses out of state and discourage more businesses from locating in Maine.
“We will accept nothing less than a repeal of the 3 percent,” said Sen. Garrett Mason, R-Lisbon Falls, the Senate majority leader.
But it was evident Thursday that there are differences of opinion within Republican ranks about education funding in general. While Fredette talked about accountability and what the state will get from that additional spending, Thibodeau suggested that he was open to discussions about funneling more money into public schools – just not with a 3 percent tax surcharge on higher earners.
“Republicans are committed to making sure we deal with that 3 percent issue,” Thibodeau said. “We agree with the Democrats that we have to honor what the spirit of the law was, which is to increase funding for public education (but) without doing the harm to Maine’s economy.”
Democrats have left the door cracked open to other funding mechanisms but suggest the onus is on Republicans to offer alternatives because, at present, the 3 percent surcharge is the law.
“We will be at the table, we will be working with our Republican colleagues, we will pass a responsible budget and it will include education funding,” Gideon said.
Kevin Miller can be contacted at 791-6312 or at: