AUGUSTA — House Republicans offered to put more money into education but insisted on eliminating an income tax surcharge of 3 percent on affluent households, as negotiations on a new state budget continued Thursday in the face of a threatened state government shutdown.

House Minority Leader Ken Fredette, R-Newport, upped his side’s offer on public education funding from $30 million to $125 million, but also said Republicans were firm in their stance on repealing the surcharge on household income over $200,000 that voters passed in November.

After Fredette made the offer in a prepared statement, Republican Gov. Paul LePage issued a statement saying that if the Legislature passes a budget similar to the latest Republican offer, he would sign it into law. That would avert a government shutdown after June 30, the constitutional deadline for getting a budget approved.

“We believe this proposal strikes the right balance between education reforms and education funds in a way that allows the policy to drive the dollars,” Fredette said in his statement. “We believe with this budget, we can close out the budget process before June 30.”

In his statement, LePage called his offer to sign the House Republican plan his “last and final concession.”

“We cannot simply tax-and-spend our way out of a budget,” LePage said. “Tough decisions must be made to deliver a budget that is balanced, fiscally responsible and benefits Maine’s hard-working taxpayers. This is not the budget I proposed; I have agreed to support $125 million in new spending beyond what is fiscally prudent. However, this is my last and final concession. … If Democrats join with Republicans to immediately pass this budget, I will put my signature on it.”

The House Republican offer is about $75 million less than what Democrats say is needed for the state to fund 55 percent of public school costs – a level set in state law that has not been achieved. Democrats have said they are open to alternatives to the 3 percent surcharge, which was enacted to funnel more money into public schools.

But they say that revenue must come from a progressive and stable source, and that they won’t accept less than $200 million. That’s well below the $320 million that the surcharge was expected to yield over the two-year budget cycle.

‘We believe this proposal strikes the right balance between education reforms and education funds in a way that allows the policy to drive the dollars.’

— House Minority Leader Ken Fredette

‘I wouldn’t want to be the one explaining to my constituents why I voted for such a plan. I don’t know why Republicans are so eager to do it.’

— Senate Minority Leader Troy Jackson

Democrats in the state Senate have said they won’t compromise on any plan that pushes more education costs on to property taxpayers. They also noted that the Republican plan freezes at $15,000 a property tax exemption for homeowners that was supposed to increase to $20,000.

“The House Republicans have come to the table, and it’s encouraging to see movement on education funding,” Senate Minority Leader Troy Jackson, D-Allagash, said in a written statement. “But their proposal is far from the finish line. It still cuts critical property-tax relief programs while giving income tax cuts to the wealthy – a trade-off that remains a nonstarter for me. Raising property taxes and cutting school funding to pay for a giveaway to the rich isn’t just bad policy, it’s political kryptonite. I wouldn’t want to be the one explaining to my constituents why I voted for such a plan. I don’t know why Republicans are so eager to do it.”

Fredette, who has been accused by House Speaker Sara Gideon, D-Freeport, of not negotiating in good faith, said the latest Republican offer includes passing into law a bill that would set up a pilot program that could lead to a statewide contract for public school teachers in Maine. The offer also funnels $10 million more to reduce Department of Health and Human Services wait lists for the disabled, eliminates $5 million of general assistance for non-resident immigrants and increases the amount of pension income that can be exempted from the state’s income tax from the first $5,000 to the first $35,000.

The Republican plan also mirrors a portion of LePage’s budget that would eliminate funding for hundreds of unfilled state government jobs, most of them within DHHS.

The maneuvering on the state’s two-year budget, which is expected to be about $7 billion, came hours before a special panel of six lawmakers assigned to work out a budget deal met Thursday.

The panel, known as a committee of conference, is made up of three Republicans and three Democrats, including Gideon and Senate President Mike Thibodeau, R-Winterport.

During that meeting, Rep. Jeff Timberlake, R-Turner, said the latest Republican offer was a serious one, although he stopped short of calling it an ultimatum. “You don’t know how far I had to move to support this,” he said.

But state Rep. Aaron Frey, D-Bangor, said the Republican offer was rehashing several policy proposals that had already been debated and rejected.

“We are dangerously close to a government shutdown, yet, rather than fully fund education and provide the property tax relief voters demand, the House Republicans are attempting to rehash settled budget lines, and shortchange our schools so they can cut taxes for the wealthy,” Frey said.

Thibodeau said he remained confident that lawmakers would reach an agreement, noting that the Legislature was on the cusp of making one of the largest investments in public schools in state history.

Sen. Roger Katz, R-Augusta, said the delay, debate and stalemate over the budget are already doing harm and taking a toll in his district, where thousands of state workers live.

“We are already hurting people,” Katz said. “There are thousands of state employees who are being hurt right now. They are nervous about their jobs. They don’t know if they are going to get paid in two weeks. They don’t know if they are going to be able to afford their car payment or their mortgage payment. They are not shopping as much in the community. They are not going out to eat as much. They don’t even know if they are going to have a job in two weeks.”

Scott Thistle can be contacted at 791-6330 or at:

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