|6/11/2015 9:57:00 AM|
Eye on Augusta: Shutdown Looming Over Tax Breaks for the Wealthy, Food & Shelter for Asylum Seekers
Budget standoff continues
It was well past midnight last Friday night when members of the Legislature's bipartisan Appropriations Committee took their final votes on the controversial two-year state budget. Republicans and Democrats had been working on the $6.6 billion spending package for 148 days, and they were getting a little punchy as they went through every line item change in the compromise hammered out between Democrats and Senate Republicans. After singing a boisterous chorus of "Happy Birthday" to fellow committee member Rep. John Martin (D-Eagle Lake) and thanking the committee staff, the panel voted 9-4 to approve the deal, with Democrats and Senate Republicans on one side and House Republicans on the other.
After a week of bitter infighting between House and Senate Republicans in which the governor even took to the airwaves to trash-talk the Republican Senate President for his willingness to compromise with Democrats, the outcome of the vote was not surprising. But as Appropriations Committee co-chair Sen. Jim Hamper (R-Oxford) pointed out as he cast his vote for the bipartisan deal, it's unlikely that the compromise will receive the two-thirds vote needed for passage and to overcome an inevitable governor's veto.
"There is no need for what we've been going through. Absolutely no need for what has happened," said Hamper. "There is a way to resolve our differences, and I am confident that those differences can be resolved."
Speaking for the House Republicans, Rep. Heather Sirocki (R-Scarborough) said her caucus would not support the deal because it didn't cut income taxes or welfare funding. "We have significant qualms with a budget that leaves hardworking Mainers burdened with high income tax rates that does not address welfare reform," said Sirocki, adding, "House Republicans want to see a decrease in the budget and the eventual elimination of the job-killing income tax."
The budget needs at least 18 House Republicans to pass the two-thirds threshhold, but GOP leaders say the caucus, dubbing itself the "Gang of 68," will vote lockstep against the compromise as written.
And by this Wednesday, budget talks had completely collapsed. In a press release, Senate Minority Leader Justin Alfond (D-Portland) accused House Minority Leader Ken Fredette (R-Newport) of failing to negotiate in good faith while "working arm in arm" with Gov. LePage to shut down the government. House Speaker Mark Eves (D-North Berwick) said the group had been "working around the clock to reach a compromise to bring Rep. Fredette aboard, but he keeps moving the goal posts." Republicans fired back that Democrats are prioritizing non-citizens and methadone treatment for opiate addicts over nursing homes and the severely mentally and physically disabled.
The bipartisan budget deal is still expected to come to the floor for votes during the next few days, but without supermajority support, a state shutdown is looking more and more likely.
The Bipartisan Deal Unravels
Like all compromises, there was something for both conservatives and liberals to like and hate in the initial deal struck between Democrats and Senate Republicans. Much to the relief of many liberals, the budget deal rejected the governor's proposals to cut the income tax, slash emergency food and shelter for the indigent, curtail drug assistance for the elderly and disabled, and eliminate revenue sharing to towns. In addition, the revised budget increased education funding by $50 million, boosted the homestead exemption from $10,000 to $15,000 for all homeowners, and invested $10 million for college scholarships. It would have also dropped the sales tax from 5.5 percent (which was scheduled to sunset this summer anyway) to 5 percent, but would have kept the meals and lodging tax at 8 percent.
"Our bipartisan plan prioritizes property tax relief for everyday Mainers and invests in our students, workers and our economy," said Rep. Peggy Rotundo (D-Lewiston), the House Chair of the Appropriations Committee, last weekend. "It rejects failed trickle-down economics, and instead focuses on growing the economy from the middle out."
Senate Republicans initially said that their biggest win was the promise by Democrats to support a separate bill that would have sent a constitutional amendment to the voters requiring a two-thirds vote of the Legislature to raise income tax rates. However, both sides have since announced that the proposal is off the table. Senate Republicans also praised the earlier compromise plan for exempting inheritances worth up to $5.5 million (from the current $2 million exemption) from the estate tax, exempting military veteran's pensions up to $25,000, and devoting an additional $200,000 to the Maine Drug Enforcement Agency.
"We Republicans campaigned on tax relief and we were able to deliver it in this budget," said Sen. Thibodeau in a statement last Saturday.
House Republicans: "The Gang of 68"
For now, the House GOP is the governor's last hope of salvaging his worn and beaten tax plan.
"You hold the future of this state in your hands. We need to stand together," LePage told the House GOP caucus on June 5. "[House Minority Leader Ken Fredette and Assistant Minority Leader Ellie Espling] are showing massive leadership."
While the House GOP plan has not yet officially been released, according to Maine Revenue Services the proposal includes a 22.5 percent across-the-board income tax rate reduction over four years, and increases tax exemptions on all pensions. Similar to the the GOP's so-called "Timbernut" plan released several weeks ago, it would retain three brackets in the income tax and would lower corporate tax rates. But like the LePage plan, it would push out many of the tax cuts into the next budget cycle, which allows the budget writers to avoid having to raise other taxes or fees to offset an inevitable revenue shortfall a few years from now when income tax cuts take effect.
And like the LePage plan, the House GOP's tax cuts are skewed to deliver the most benefit to the wealthiest Mainers, by admission of the governor's own staff.
"The distributional analysis is a little better than before, but still heavily weighted to the top end," wrote Maine Revenue Services Director Michael Allen in a letter to the governor's Chief of Staff Kathleen Newman.
To help pay for the income tax cuts, the plan would keep the sales tax at 5.5 percent; increase the tax rate on personal home care services like home health care support, as well as cable and satellite television services, from 5 to 6 percent; raise the lodging tax from 8 to 9 percent; and slap a 5.5 percent tax on various prepared food items that are not taxed now.
In trying to deflect criticism that the House GOP plan only helps the wealthy, House Appropriations Committee member Rep. Jeff Timberlake (R-Turner) told WVOM hosts George Hale and Ric Tyler on Monday that the plan gives wealthier taxpayers a bigger tax break because they pay more in income taxes than other Mainers.
"We're not giving tax breaks to the rich. We're giving it equally across the board," said Timberlake.
The Immigrant Issue
But perhaps the biggest sticking point for Republicans, and one they're willing to go to the brink of a state shutdown for, is the state's policy of providing emergency food and shelter funding for legal non-citizens. While the funding only amounts to $2 million a year, a tiny piece of the $6.6 billion budget, Gov. LePage and Republicans campaigned heavily on ending support for the roughly 1,000 mostly Central African immigrants in Maine fleeing war and political persecution. In a June 6 op-ed, Tea Party firebrand Rep. Larry Lockman (R-Amherst) blasted "left-wing progressive Democrats" and "some squishy progressive Republicans" for building a budget that "subsidizes the growing number of non-citizens and illegals who are moving to Maine."
"Democrats are dug in so deep on this issue that they are willing to risk a state government shutdown to get their way," wrote Lockman.
According to the Pew Hispanic Center, Maine has one
of the lowest percentages of unauthorized immigrants in
the country, comprising less than 0.2% of the state's population (or under 5,000 people). Maine is also the oldest, whitest, and most rural state in the country with a foreign-born population of just 3.6 percent compared to the U.S. average of nearly 13 percent, according to the U.S. Census Bureau.
Polarized, Divided Legislatures
Maine's acrimonious power struggle may seem out-of-the-ordinary for a state where, as the Boston Globe Editorial Board put it, "state politics tend toward the collegial." However, Maine is not the only state mired in ideological dysfunction this budget season. According to various press reports, high-stakes standoffs are happening in legislatures across the country, from Louisiana and Florida to Illinois and Kansas.
"While some states led by Democrats are having budget problems, too, there are far more states where Republicans control both the Legislature and the governor's office: 23, compared with seven states controlled by Democrats," The New York Times's Julie Bosman wrote on June 7. "Some of the bitterest budget fights this year pit conservative Republicans against centrist Republicans over how to cut spending or raise taxes."
In several states that have cut income taxes, legislators are considering raising more regressive consumption taxes that fall more heavily on middle- and low-income people and violate sacred Republican "no new tax" pledges.
"A lot of governors have cut their taxes with the hopes that that would bring increased economic activity and they could postpone painful decisions about spending reductions," Tracy Gordon, a senior fellow at the Urban-Brookings Tax Policy Center in Washington, told the New York Times. "But those increases in economic activity haven't come to pass."
The Legislature has until around June 18 to negotiate, draft, debate and vote on the budget to ensure it gets enacted by the June 30 deadline. The governor is legally allowed to hold it for 10 business days before deciding whether to sign it or veto it. In the likely event of a veto, legislative leaders will then only have one day to gather the two-thirds vote necessary to pass the budget before furlough notices go out, state services are severely cut back, and protestors erect a little shanty town on the State House lawn like they did during the last state shutdown in 1991.
In his weekly address, LePage said Democrats can avoid a shutdown if he submits a "continuing resolution" to keep the state government funded, like Congress has done during its own budget showdowns. However, Attorney General Janet Mills countered that the Maine Constitution does not allow for such an action, as it requires a balanced budget by the end of the fiscal year.
"Budgeting month to month, even with the two-thirds majority that would be required, when income is erratic and when new contracts and debt payments are due, would call into question the state's ability to enact a budget that is balanced as required by the Maine Constitution," AG spokesman Tim Feeley added. "The very suggestion might also raise red flags with the bond market and put our credit rating at risk."
Meanwhile, House Republicans have said it's worth the risk. "No one I REPEAT NO ONE WANTS TO SHUT DOWN GOVERNMENT," wrote Rep. Jeff Timberlake in a Facebook post. "But their [sic] is some point you have to stand up for what you believe in and do what is right. It is always hard work to do the right thing usually if you take the easy way out your not doing the right thing. I PROMISE YOU I WONT TAKE THE EASY WAY OUT I will stand on principal."
If the rhetoric coming out of the House Republican caucus is any indicator, it could be a long summer for the Maine Legislature.
Article Comment Submission Form