January 20, 2013

Michael Cuzzi: Governor's budget a disappointing fiscal shell game

In using gimmicks, Paul LePage has proven more middling politician than savvy businessman.

When Gov. Paul LePage took office, I gave the sharp-talking businessman-cum-mayor the benefit of the doubt. I wanted him to succeed.

Like many others, I was ready for some fresh ideas in Augusta and perhaps -- just perhaps -- LePage could bring a new perspective to the corner office and a business-like approach to the state's finances.

Two years hence, despite his rhetoric and tough talk, the governor has proven more middling politician than savvy businessman, disappointingly embracing the same budgetary gimmicks he publicly denounces.

In the last Republican-controlled legislative session, the governor and his Republican allies -- and yes, some Democrats -- passed the "largest tax cut in Maine history." On its face, a great thing.

But in addition to skewing the majority of the benefits to the wealthiest among us, those cuts had a deeper problem: they were never paid for.

Today those cuts represent $400 million dollars -- or nearly 45 percent -- of the state's current structural gap for the next two-year budget.

But rather than admit that the state cannot afford the cuts, the governor has engaged in one of the most intellectually dishonest budget gimmicks in recent memory.

In order to make good on his bad fiscal policy, the governor proposes to slash revenue sharing to local municipalities, eliminating $420 million that local cities and towns have appropriately and expectantly built into their existing budgets.

A $400 million tax cut followed by $420 million in cuts to state funding for local communities. Do those figures look similar? They should.

The governor is playing a fiscal shell game, telling taxpayers he's giving them a tax cut but then forcing local taxpayers to pay for them through reduced services or higher local taxes.

For the taxpayer, it's the difference between the money coming out of your right pocket or your left.

But the governor's fiscal gimmickry doesn't end there.

For two years, the Governor and his allies -- most notably former Treasurer Bruce Poliquin -- repeatedly claimed the state was too deep in debt to issue voter-approved bonds and that it needed to pay existing bills, especially to state hospitals.

But last week, the governor exposed that claim as little more than an ideological talking point, announcing that the state of Maine should pay our nearly $500 million hospital debt by -- wait for it -- issuing new debt.

Yes, the governor announced his plan to retire the hospital debt by issuing a revenue bond secured by anticipated sales from a yet-to-be-negotiated new state liquor contract. (Sounds like air tight, disciplined fiscal policy, right?)

And if that fiscal sleight of hand wasn't hypocritical enough, LePage went on to claim that with the hospital debt "retired" by new debt, he is finally willing to issue $105 million in voter approved bonds.

(Cue Gary Coleman for a robust "What you talking 'bout, Willis?")

Either the governor's previous claims about bonding and indebtedness were pure political posturing, or he's finally come around to the normative view that the state has adequate and appropriate capacity for it, especially with interest rates at historic lows.

Thankfully for all of us, the governor's proposed elimination of municipal revenue sharing is dead on arrival, providing zero political cover to legislators from either party who must answer to local town managers, police chiefs, teachers and residents.

In its place, legislators should suspend (not repeal) the governor's tax cuts for the next two years and until such time that revenue growth exceeds an agreed upon trigger-level, at which point the cuts can return in their entirety.

That's similar to the sales tax deal struck by the legislature and Gov. John McKernan in 1991, gets current legislators 45% closer to a balanced budget this session and lessens the potentially appalling cuts to health care and educational programs.

Legislators must also have an honest discussion about new revenues, whether it's the tax indexing already proposed in the governor's budget (yes, the governor proposed a tax increase), a marginal income tax hike for those making over $250,000 as proposed by Republican state Sen. Tom Saviello, or perhaps a larger tax reform package that has eluded prior Legislatures for years.

Despite the political costs or ideological aversions to this discussion, our financial situation positively requires that it happens.

Finally, taking a longer view, the best way to address our budget challenges is through growth.

On this score, both parties are missing the boat. If either has a well-articulated, integrated and innovative plan for sustainable economic development and job creation, I haven't seen it. The party that owns this discussion will reap the political rewards.

In the end, if legislative leaders can maintain a modicum of the comity and bipartisanship that they have demonstrated thus far, they can craft a responsible and balanced majority budget, rendering the governor's fiscal gimmickry and hypocrisy a disappointing side note to a disappointing first term. 

Michael Cuzzi is a former campaign aide to President Obama, Sen. John Kerry, and former Rep. Tom Allen. He manages the Portland office for VOX Global, a strategic communications and public affairs firm headquartered in Washington, DC. He can be reached at:

mjcuzzi@gmail.com

Twitter: @CuzziMJ

 

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