|1/8/2015 8:50:00 AM|
Eye on Augusta: The Governor's 2015 Agenda; Welfare, Energy and "Right to Work"
by Andy OBrienThis week, as Republican Governor Paul LePage was inaugurated for his second term in office, there was no question what his four main priorities would be: cutting aid to the poor (aka: "welfare reform"), eliminating renewable energy subsidies (aka: "lowering energy costs"), cutting taxes for the wealthy and reducing government services (aka "right-sizing government").
Welfare Reform and Local Families
While the governor has not articulated exactly what he has in mind for welfare reform, he has repeatedly stated that the main focus will be to tighten restrictions on Temporary Assistance for Needy Families (TANF), a cash assistance program for low-income families accounting for less than 0.5 percent (or $30 million) of annual general-fund spending.
"We won't stop implementing common-sense welfare reforms," announced LePage in his weekly address following his re-election. "The people of Maine told us they want welfare reform, and we will do what is right for them."
But even with more restrictions on anti-poverty programs to come, clearly previous reforms have already been hitting poor families hard. In 2012, before LePage's 60-month limit on receiving TANF took effect, there were about 14,000 families receiving TANF, but according to the latest monthly report, there are now just 6,200 families in Maine receiving the cash benefit, including 10,247 children. "Amy," a Belfast resident whom The Free Press profiled a little over a year ago ("Slashing the Safety Net in Lean Times," 3/21/13), is currently facing eviction due to her inability to make rent. After being cut off from TANF in May 2014 due to the 60-month limit, the 35-year-old single mother of three said she had to drop out of a degree program at the University of Maine because she didn't have the money to travel back and forth to Orono.
"The job hunt has been awful," she said. "I've put in well over 100 job applications from Bangor to Auburn, and had one interview. Because I was self-employed for so long, and haven't had a 'real job' in 10 years to give a reference, I assume they just don't even give my application a second look."
And after the car finally died after failing an inspection in September, it's been even more challenging to make it to job interviews. Compounded with bad luck and loss of $428 in monthly TANF benefits, the family is also in danger of losing a chunk of their monthly food stamp allotment due to a $8.6 billion cut to the Supplemental Nutrition Assistance Program (SNAP) made by Congress in last year's Farm Bill. The complex and confusing provision, which affects about 10,000 low-income people in Maine, requires people whose heat is included in their rent to submit additional paperwork to continue receiving benefits (Free Press 2/27/2014, "10,000 Low-Income Mainers Facing Cuts to Food Stamps"). Caseworkers have reported long waiting lists due to lack of staff to process all of the paperwork. In the meantime, Amy is seeking help from relatives to stay in their home.
"Basically everything is in limbo right now," she said. "We are very unsure and unsettled right now and we are rapidly running out of options. It's a rough patch, but we will make it. I'm just glad I will be able to qualify to hold off my student loan [payments]. The one silver lining in the whole mess!"
A survey by University of Maine sociologist Sandra Butler found that between June and October 2012, more than 1,500 Maine families, including 2,700 children, lost their TANF benefits due to the 60-month limit. According to the study, nearly 70 percent of those surveyed reported that they had gone to a food bank, about a third lost utility service, and 20 percent reported being evicted from their home, had to relocate, lived in overcrowded conditions or were forced to stay in a homeless shelter. And after 6,000 Mainers lost their food stamps benefits last week due to newly enforced work requirements on SNAP, 2015 promises to be an even tougher year for Maine's most vulnerable residents.
The Big Tax Shift
The biggest battle of the legislative session will likely once again be over whether to shift the income and estate tax burden, primarily paid by wealthier Mainers, to property taxes and sales taxes, which disproportionately fall on low- and middle-income taxpayers. Municipal leaders are already gearing up for a fight over revenue sharing, which is a pot of state money paid to towns that is derived from 5 percent of sales and income taxes. The revenue sharing provision was first codified into law in 1972 to help municipalities pay for state mandates like elections, code enforcement, shore land zoning, solid waste disposal, and animal control, to name a few. According to state statute, revenue sharing is a form of property tax relief to ensure that the burden of paying for mandates and essential municipal services like police and fire protection doesn't fall solely onto property tax payers.
In economic downturns, such as in 1991 and 2008, the state raided revenue sharing to help balance its own budget, treating it as a kind of a second "rainy day fund." But unlike previous governors, LePage has vowed to eliminate the program as a way to offset revenue losses from his own tax cuts. In 2011, the LePage administration cut over $400 million in state taxes, including over $300 million in income and estate tax cuts, resulting in a $400 million budget hole two years later. Although the budget mess could have been resolved if the Legislature either suspended or cancelled the tax cuts in order to balance the budget and restore municipal aid, the governor proposed a complete suspension of revenue sharing and other aid to municipalities, amounting to an estimated $425 million loss to cities and towns.
Last year, the Democratic-led Legislature amended the governor's proposal to cut revenue sharing by a third while shifting about $29 million of the state's $201 million in state-mandated teacher retirement obligations to school districts, cutting funding to property tax relief programs, and raising sales, meals and lodging taxes. Much to the dismay of many municipal leaders, over $300 million in income tax cuts passed in 2011 were preserved.
"Instead of sharing, state government has come to treat revenue sharing as a magic ATM machine, the withdrawals from which never have to be repaid," wrote Maine Municipal Association lobbyist Geoff Herman in the organization's latest newsletter.
With the state only paying 40 percent of the tax revenue it's mandated to share with towns and cities, municipal leaders have been forced to raise property taxes and cut services. Of the three major taxes in Maine, property taxes generate the bulk of revenue at 45 percent, while income taxes bring in 33 percent and sales taxes generate 22 percent of revenue. The governor's new budget is not due out until January 9, but he has hinted that he will attempt to phase out the income tax and exempt pensions from taxes, which he would likely offset by cutting revenue sharing further and raising sales taxes. Abolishing the income tax completely would mean a loss of $1.41 billion in annual state revenue, or 33 percent of state revenue. In the past six years, Maine's average per-capita property tax burden increased from $1,623 in 2008 to $1,987 in 2014, with coastal residents paying the highest rates. Mainers paid an average of 4.9 percent of their personal income to property taxes and 2.6 percent to income taxes in 2014.
Revenue sharing advocates have also noted the irony of the governor eliminating a program he once fiercely defended. Since becoming governor, LePage has dubbed the program "welfare for communities," but as Mayor of Waterville he had a different take.
"All they're doing is transferring the state responsibility back onto the property tax [payers] and people keep falling for this governor's bullshit," Mayor LePage bellowed during a city council meeting in 2009 when the Democratic Baldacci administration was proposing revenue sharing cuts.
But despite the governor's bravado over tax reform, most local legislators have been generally opposed to his ideas. Freshman Independent Rep. Gary Sukeforth of Appleton, who is the tie-breaking vote on the Taxation Committee, says he is a "strong proponent of progressive taxation," though he recognizes that Maine has to compete with other states that have little or no income tax. He added that he would likely oppose any attempt to exempt pensions from the income tax.
"I think that we're all in this together and we all need to pay our fair share," said Sukeforth. "The Republicans say we eliminated taxes [in 2011] for a lot of people ... but the reality is that when you look at the dollar figures, the money went into the pockets of rich people."
However, Sukeforth, a retail store owner, said he would consider proposals to broaden the sales tax to tax items that are not currently taxed. Maine currently raises about $1 billion in sales taxes, which would have to be raised to make up for a loss of $1.4 billion from abolishing the income tax. But according to the non-partisan Tax Foundation, Maine provides $1.87 billion in annual sales tax exemptions, which would be more than enough to make up for any forgone income tax revenue.
"The good news, however, is that Maine's sales tax base is very narrow to begin with and could be broadened," the organization wrote on its website. "What this means is that it is levied on few goods and services that are legitimately personal consumption and should be taxed."
But that's easier said than done, as the Legislature has repeatedly brought forward initiatives to lower the income tax by expanding sales taxes to discretionary activities like amusements and recreational services, only to be thwarted by Republicans and the voters through a 2010 citizen veto at the ballot box. Senate President Mike Thibodeau has repeatedly stated his opposition to both expanding the sales tax and cutting revenue sharing, but whether he will compromise on those convictions to lower the income tax remains to be seen. Independent Rep. Jeff Evangelos of Friendship, a staunch supporter of revenue sharing, has submitted a bill to require that the state go from paying 41 percent to 70 percent of its revenue sharing obligations, which would then automatically increase by 5 percent each year after that.
"The idea that we're going to be giving millionaires an income tax break while we're asking mom and pop on Social Security to pay more in property in taxes is disgraceful," said Evangelos.
Going After Renewable Energy
According to a recent report by the Pew Charitable Trusts, Maine is one of eight states that is leading the way in the clean energy economy, with businesses investing over $900 billion in the renewable energy sector between 2009 and 2013. That investment is projected to rise to $2 billion by 2023, which the organization says is due to the state's highest-in-the-nation renewable energy portfolio standards (RPS). Under the RPS, utilities will be required to source at least 40 percent of electricity from renewable sources by 2017.
However, Senate President Mike Thibodeau says the current RPS model has led to higher electricity costs and needs to be reformed. According to a report by the Office of the Public Advocate, Maine residents pay about 62 cents a month on their bill for all of the state's renewable energy policies that help subsidize wind, solar, and biomass. The total cost of RPS is about 35 cents a month for the average residential rate payer. Thibodeau says that with higher electricity prices, renewable power producers should no longer receive subsidies.
"I think it's something that would direct the PUC to go in and set a trigger where the ratepayers are offered some sort of relief from having to pay for these subsidies for these folks that are doing very, very well financially given the high energy rates," said Thibodeau.
Targeting Organized Labor Again
Aside from welfare and renewable energy, the Legislature will also most certainly be considering so-called "right-to-work" legislation that would make it optional for non-union workers to pay their share of collective bargaining costs. Republicans see "right-to-work" as a tax on employees that drives up labor costs for businesses. Labor unions say the policy allows workers to get the same benefits from collective bargaining, such as wage increases and representation in the grievance process, as dues-paying members without having to pay for it. A 2011 study by the Economic Policy Institute found that while the employment rate in RTW states was about 1 percent higher than non-RTW states, wages were also 3.2 percent lower in RTW states.
Although the Democratic-controlled House of Representatives presents a potential stumbling block to the governor's agenda, LePage and Republican leaders will likely blame Democrats for blocking legislation or budget impasses, putting intense pressure on Democrats to compromise. And with or without the Democratic leadership's blessing, there are still only eight Democratic and independent votes in the House standing in the way of Republicans passing many of their key legislative priorities.
As the governor said in his weekly address following his re-election, "We have listened to you, and we hear you. We hope the Legislature is listening too."
Posted: Tuesday, January 13, 2015
Article comment by:
Regarding the common-sense approach with welfare. Can LaPage take a second look at people who receive full benefits from the state and drive around in brand new cars.Really, how is it possible to afford full insurance and registration tax ? Also, there needs to be a way to figure in the out of pocket money mommies collect from the fathers of their children. I am NOT speaking of the mandated child support. There are still so many ways tocheat the system.
Article Comment Submission Form