June 11, 2011

Lawmakers reach deal on budget for state

Gov. Paul LePage says he'll need to examine 'the little print' in the $6.1 billion Appropriations plan.

By Susan M. Cover scover@mainetoday.com
State House Bureau

AUGUSTA - The proposed state budget to be considered by the House and Senate next week calls for tax cuts, major reforms to the state pension system and some of the welfare reforms that Gov. Paul LePage advocated.

The $6.1 billion, two-year plan that earned unanimous approval from the Legislature's 13-member Appropriations Committee late Thursday night represents a series of compromises designed to win the two-thirds support it needs in the House and Senate.

The committee's House chairman, Rep. Patrick Flood, R-Winthrop, said Democrats and Republicans worked to find money to avoid some cuts to human services. On the final night of negotiations, Flood presented an amendment offering $20 million in future revenue from wholesale liquor sales to help prevent any budget gap.

"Back in February, when I saw all the significant policy changes (proposed by LePage), it made me believe we were going to need additional resources" to balance the budget, Flood said.

He's hopeful that the compromises made in committee by both parties will lead to passage of the budget for the two years that start July 1.

LePage, a Republican who took office in January, said Friday morning that he hadn't seen all of the details. "Unfortunately, I like to look at the little print," he said. "That little small print? That's where the devil is."

In particular, LePage said he wants to review the proposed tax cuts and pension reform. "And I understand there's been minor changes in the welfare, and I want to look at the changes," he said.

PENSION SYSTEM

Appropriations Committee members agreed last week on a series of reforms to the state pension system, using LePage's proposal as a starting point.

LePage told lawmakers when he proposed his budget in February that the state had to take major steps to address two issues with the Maine Public Employees Retirement System: rising short-term costs that will demand a larger and larger share of state money, and an estimated $4.1 billion unfunded liability that must be paid off by 2028.

LePage wanted to require state workers and teachers to put an additional 2 percent of their pay into the system, while lowering the state's share of the cost. That and other changes were designed to free up money for tax cuts.

Last week, the committee voted to eliminate that requirement, with revised figures showing that the change would require most workers to contribute 9.65 percent of their pay, while the state's share would be less than 1 percent.

The committee made other changes, limiting annual cost-of-living increases for retirees to 3 percent, rather than 2 percent as proposed by LePage. It also voted for a one-year freeze on increases, followed by state payments to replace the increases for two additional years.

One controversial part of the committee's proposal is a $20,000 cap on the annual retirement income to which the increases are applied. The Maine State Employees Association worked to increase that to $25,000, but the additional $26 million cost was more than lawmakers could afford, said Rep. Peggy Rotundo, D-Lewiston.

"Democrats worked hard to push back against the governor's proposals on pensions," she said in a prepared statement. "We have a bipartisan commitment from those of us on the committee to continue to work to raise the cap on cost-of-living adjustments and find a longer-term solution."

Chris Quint, executive director of the Maine State Employees Association, said the union is happy with some of the concessions but cannot support the budget because of the $20,000 cap.

"This is going to permanently impact over 50 percent of current retirees," he said.

The committee-approved plan would shave an estimated $1.7 billion from the retirement system's long-term debt.

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