January 11

LePage to present two-year budget proposal today

Plans to plug shortfalls this fiscal year and in the next biennium will likely seek savings to protect tax cuts.

By Steve Mistler smistler@pressherald.com
State House Bureau

AUGUSTA — Gov. Paul LePage has scheduled a news conference for 3 p.m. today to present his new two-year budget proposal, as well as a plan to balance the budget for the current fiscal year that ends June 30.

LePage's office issued a media alert this morning saying, "the proposed biennial budget balances priorities for the people of Maine by maintaining the crucial safety net for our most vulnerable while holding the line on our already too high tax burden."

"We need to examine our spending practices, evaluate our delivery of services and gain control of our welfare system," LePage said in a written statement. "Maine's fiscal security and future is at stake, and we must make hard choices."

Before the media briefing, legislative leadership and members of the Appropriations and Financial Affairs Committee will get the details on both budgets from administration officials.

The governor is expected to release a proposal for more immediate budget cuts to plug a more than $100 million gap in the current two-year budget.

No details of LePage's two-year spending plan have been revealed in advance, but Democrats, Republicans and their respective allies have been busy laying rhetorical groundwork for a proposal that is expected to include large spending reductions at the Department of Health and Human Services and other savings in an effort to protect a $400 million tax cut package that the Legislature passed in 2011.

The tax cut package received two-thirds support in the previous Republican-controlled Legislature, but the governor believes the new Democratic majority will attempt to roll back the tax reductions during the coming budget debate. Over the past two weeks, LePage has touted the benefits of the tax plan, including in a video posted by his office and in his weekly radio address.

LePage's Republican colleagues also have defended the tax cuts on several fronts, saying the tax relief is especially important because Congress eliminated a payroll tax cut in the Jan. 1 fiscal cliff deal.

The cuts reduce the top income-tax rate from 8.5 percent to 7.95 percent and eliminate income taxes for about 70,000 Mainers. Supporters say the reductions will save a family of four with an income of $48,000 a little more than $300 annually.

The reductions went into effect Jan. 1, but the lost revenue will be reflected in the state's next two-year budget -- the one LePage will present Friday. The state's revenue forecasting committee has projected the budget must close a projected $880 million shortfall, 45 percent of which is represented by the tax cut plan.

Democratic leaders have not announced any specific plans to repeal the tax package, which would require some Republican support to overcome any potential LePage veto. Asked this week about repealing or delaying the tax cuts as a budget solution, Democratic leaders would only say that all options are on the table.

Advocacy groups, meanwhile, are gearing up for a fight over taxes.

Democratic-leaning groups have begun broadcasting the role of the tax cuts in ballooning the budget gap. The left-leaning Maine Center for Economic Policy, for example, released a report Thursday saying that the tax cut package "blew a nine-figure hole in the state's balance sheet" when combined with a decrease in revenues because of the recession.

Republican-leaning groups countered that now is not the time to raise taxes or, in Maine's case, roll back scheduled tax cuts. The Legislature's House Republican Office on Thursday issued a media alert about an analysis by the conservative advocacy group the Maine Heritage Policy Center and a blog written by Matt Gagnon, the digital strategist for the Republican Governors Association.

(Continued on page 2)

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