AUGUSTA — In a surprise move late Monday, Democrats on the Legislature’s budget-writing Appropriations Committee voted out a bill that would restore $40 million in state revenue sharing to Maine municipalities.
In a straight party-line vote, majority Democrats on the committee passed the measure on to the full Legislature on 7-0 vote without any Republicans present.
The move drew the immediate condemnation of Republican leadership and Gov. Paul LePage’s office. LePage’s press secretary, Adrienne Bennett, said, if the bill passes the Legislature, it is destined to be vetoed by LePage.
“Republicans are not on board for this and the governor has their back,” Bennett said.
Meanwhile, a spokesman for House Republicans said the move was unnecessary as current law already includes a backstop that would restore the $40 million in revenue sharing using any future state surplus and other funding.
“Democrats are trying to make a public relations splash about revenue sharing in an attempt to attack the governor in an election year,” said David Sorensen, the communications director for House Republicans. “In the meantime, they are misleading the public and the press in a blatant display of D.C.-styled politics.”
If the measure moves forward beyond his veto, the governor has vowed to withhold authorizing between $85 million and $100 million in state borrowing that would fund a range of infrastructure improvements around the state.
Rep. Peggy Rotundo, D-Lewiston, the House chairwoman of the committee, said the move Monday was necessary in order to restore the funding in time for towns and cites in Maine to prepare their annual budgets.
Most of the funding in question would come to municipalities in 2015, but many towns will be presenting their budgets to voters in March.
“Once those town meetings take place, their budgets are set and that’s when they start talking about letting firefighters go, letting police officers go because their budget is set for the coming year,” Rotundo said. “That’s why it’s critical to take action now.”
Sen. Dawn Hill, D-Cape Neddick, the Senate chairwoman of the committee, said she was disappointed Republicans on the committee chose not to be there for the vote late Monday but Republican leaders said their members believed the vote was going to be tabled until Tuesday afternoon.
Hill said she respected the Republican lawmakers’ choice but she and her Democratic colleagues on the committee were committed to maintaining a promise to restore revenue sharing to municipalities in an attempt to protect property tax payers from seeing steep increases as towns and cities scrambled to make up lost revenue.
Hill said Democrats came to the decision to move forward alone after several discussions over the past few weeks with their Republican colleagues, including some conversations on Monday.
“Based on that, we realized putting this off any longer wasn’t going to change the outcome; it would just be delaying, which is exactly what we didn’t want to do to the towns,” Hill said.
But Republicans on the committee reached by phone said they were under the impression there was to be a public discussion and vote on the measure Tuesday.
“I am absolutely stunned by this brazen move by the Democrats,” said Rep. Kathy Chase of Wells, the lead Republican on the committee. “I left the State House with the understanding that we would not vote on the measure until tomorrow afternoon.”
The Democratic plan to restore the funding depends on moving funding from several sources, including $21 million from the state’s so-called “budget stabilization fund,” essentially the state’s savings account.
The fund has about $60 million in it but Republicans said raiding that fund will hurt the state’s bond rating, which determines the interest rates at which the state can borrow money. The Democratic plan also includes language that would restore that funding come July 1.
The Democratic plan also depends on $15 million in new revenue based on the state’s most current revenue forecast. But another forecast is due in March that would paint a clearer picture of what funds the state will have available for 2015.
Another $4 million in the Democratic plan comes from a fund that was set up to eventually reduce the state’s income tax rate.
State Finance Commissioner Sawin Millett said there was little doubt the rating agencies in New York would downgrade the state credit rating if the stabilization fund is not maintained. Millett also said it’s questionable to count on a revenue forecast that has not been issued.
Republicans also said Democrats were jumping the gun by trying to fix municipal finances for 2015 without first addressing the budget shortfall the state is facing for 2014.
“It feels to me like this is a premature political move that should have been held in abeyance; if there’s an attempt to look at the shortfall that we know exists in our operating budget, why wouldn’t it be more sensible to deal with the current fiscal year shortfall rather than to try and jump out ahead and resolve an (fiscal year) 2015 issue?” Millett said.
Millett said a change in the bond rating could bump the state’s borrowing interest rates by as much as 1 percent. “And when we are talking about $100 million, over a 10-year term, that really starts to add up,” Millett said.
He and other Republicans also questioned why the committee did not accept any recommendations from a special legislative task force that worked through the summer and fall of 2013 to come up with the $40 million needed to restore revenue sharing to cities.
“What they are really saying tonight is that task force can’t find a nickel to address what they previously authorized as spending, so now they are rushing around trying to find a way to plug a hole and getting way ahead of themselves on dealing with the more immediate problems of the current year budget shortfall,” Millett said.
Rep. Ken Fredette, R-Newport, the House Minority leader, said the move was unprecedented and one that would create a difficult environment as lawmakers struggle to reach bipartisan compromise on other fiscal issues facing the state in the remainder of the 2014 lawmaking sessions, which is set to adjourn in April.
Both he and the Senate’s Minority Leader, Michael Thibodeau, R-Winterport, chastised their Democratic colleagues and noted the committee’s chairs in recent years have prided themselves on producing either unanimous or at least bipartisan budget solutions.
“Our committee members have requested, Republican leadership has requested that we deal with 2014 because we feel that’s the most important priority — paying our bills and doing that in a responsible way,” Fredette said. “For the Democrats to push forward with a vote without one committee member sitting at the table is irresponsible.”
Thibodeau said Republicans on the committee were not aware the vote was coming and were not afforded the opportunity to debate the bill.
He said Democrats waited until Republicans left to vote after those members were told that would not happen until Tuesday.
“It suggests that Republicans decided not to be part of the process, which is completely false,” Thibodeau said. “They voted out a bill, without discussion that is simply something that was worked out by the Democratic caucus. Whether they mislead the committee by mistake or on purpose it’s unfortunate to put their colleagues in this kind of position. Republicans and Maine people expect better and deserve better than the treatment we received tonight.”
In 2013, lawmakers reduced revenue sharing from about $96 million to about $65 million for 2014; if the $40 million hole isn’t filled, that figure will drop to about $20 million in 2015. Together, the reductions would amount to a 79 percent cut in state funding for municipalities over the two-year period.
According to a recent analysis by the Maine Municipal Association, a failure to restore the funding level would mean that instead of $2.6 million from the state in 2015, Lewiston would get $881,030.
For Bangor, instead of a little more than $2 million, the city would receive $692,550; and for Portland, the change would be from $3.9 million to $1.3 million.
Before the vote, Rotundo said the Legislature had an obligation to those cities and all the towns in Maine to restore the funding they need to function and to prevent increases in property taxes or steep reductions in municipal services.
“It’s very clear our municipalities are facing a crisis that needs to be addressed as they do their budgets, we need to address this issue now and not put it off so they can do their budgeting for the coming fiscal year,” Rotundo said. “We are not interested in having local property taxpayers have to pay more property taxes and we need to address it now, so we will move forward.”
Lawmakers who were absent will still have 24 hours to cast a vote, but even if all Republicans on the committee vote against the bill, it will still move forward.
Hill and Rotundo said the bill could be before the full House of Representatives as soon as Thursday for a vote.
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