AUGUSTA — After months of negotiations, the Legislature’s budget committee has released two competing spending plans for consideration in the House and Senate, after the last vote was cast shortly before 12:30 a.m. Saturday.
The tradition of unanimous budget reports from the Appropriations Committee shattered this year after GOP members of the Legislature split on whether to insist on income tax cuts and welfare reform.
The seven Democrats and two Senate Republicans on the committee supported a compromise deal worth roughly $6.6 billion over the next two years. Their plan includes increased spending for education, a cut in the estate tax and increased property tax relief.
But House Republicans say that deal won’t fly. Their leader, Rep. Ken Fredette of Newport, said his 68-member caucus won’t support any deal that doesn’t include income tax cuts and welfare reform. If it remains united, Fredette’s minority easily could sustain an expected veto from Gov. Paul LePage, thereby torpedoing any budget deal.
To that end, the four House Republicans on the committee voted out a separate, more conservative plan that includes broad income tax cuts and changes in state assistance programs that would kick many immigrants, including asylum seekers, off the welfare rolls.
While the vote in the committee has been eagerly awaited by observers, it’s not expected to be the final word on what an enacted two-year budget will look like: Leaders in both parties said Friday that high-level negotiations will continue in an effort to secure the votes necessary to get a budget through the House.
Sen. James Hamper, R-Oxford, Senate chairman of the Appropriations Committee, said Friday after the committee’s final budget vote that he didn’t believe either proposal could garner the two-thirds support needed for approval in the House or Senate.
He said he’d look to party leaders to continue negotiations in an effort to win over skeptics in both chambers, which he said likely would require additional amendments.
“What we’re producing tonight is two reports. I don’t believe either report will garner two-thirds vote in either chamber. That concerns me greatly,” Hamper said as the committee wrapped up. “I’m confident that in the coming days, we will have something that will draw both parties, both chambers, together.”
Here’s the deal
The compromise included a provision to increase estate tax exemptions to the federal level of $5.5 million, up from the state’s current $2 million exemption. It also exempts the first $25,000 of military retirement income and allows the sales tax to drop in July, as scheduled, from 5.5 percent to 5 percent. Those items were co-vetted by the GOP.
Republicans also convinced Democrats to send voters a constitutional amendment to require any future increases in the income tax to win two-thirds support in the Legislature, which Senate Majority Leader Garrett Mason, R-Lisbon, said would protect Mainers from the “long arm of greedy government.”
“Republicans have a lot to like in this budget,” Mason said in a prepared statement. “We reduced the sales tax burden on Mainers and stopped a proposed sales tax broadening [included in Gov. Paul LePage’s budget plan] that would make average Mainers tax collectors for the government. With the provisions eliminating the tax on military pensions and lowering the estate tax, Mainers will have their hard earned money and family businesses protected. Senate Republicans were determined to see the tax burden on Mainers reduced, and we have done that in this budget — both for the short term and the long term.”
In the compromise, Democrats won $40 million in additional annual spending on K-12 education and the uninterrupted flow of state funding for services at the municipal level, which towns say is necessary to keep property taxes from rising. The deal also increases the state’s homestead property tax exemption — a top Democratic priority — from $10,000 to $15,000.
The deal also protects General Assistance funds for immigrants, including asylum seekers, who LePage and the House Republicans want to make ineligible.
The only tax increase in the majority compromise plan is a continuation of the 8 percent tax on restaurants and hotels, which was scheduled to decrease to its original 7 percent rate in July. That increase will help pay for the additional education spending.
“The bipartisan budget agreement is a huge win for Maine families and our economy,” House Speaker Mark Eves, D-North Berwick, said in a prepared statement. “It prevents a state shutdown and helps everyday Mainers by boosting property tax relief and investing in our students and workers. By investing in our schools, students and workers, we are putting a down payment on Maine’s middle class and helping to write Maine’s comeback story.”
Fredette offered a much simpler prognosis: “This budget is dead on arrival,” he said.
Stalemate still seems certain
While Democrats and Senate Republicans hailed the compromise, its passage is far from assured.
Because two-thirds support in both chambers is needed to pass the spending plan, all eyes are on Fredette and his House Republicans — the only group not on board with a deal hammered out last weekend by Eves, Republican Senate President Mike Thibodeau of Winterport and Senate Democratic Leader Justin Alfond of Portland.
Fredette said Friday that negotiations on income tax cuts continued among Alfond, Eves and himself, but he repeated his claim that he was being excluded from budget negotiations between the other three leaders — a claim Democratic leaders said was untrue.
The largest sticking point continues to be income tax cuts, a situation that has persisted since LePage first introduced his budget plan in January. Republicans want sweeping cuts at all levels of the income scale, while Democrats say any cuts must be targeted toward the middle class, not the wealthy.
The minority budget, backed by the House GOP, includes a flat 22.5 percent reduction in the income tax, phased in over four years. To pay for it, they would increase the sales tax, lodging tax and meals tax. The plan also would cut funding for General Assistance and bar many immigrants, including asylum seekers, from receiving benefits under that program.
Additional details of the House Republican plan will be revealed in the coming days, but Rep. Heather Sirocki, R-Scarborough — one of the four budget negotiators who backed the minority report — said the tax cuts were essential for a good budget.
“More money in the hands of the people is better than more money in the hands of bureaucrats,” she said.
Thibodeau, the Senate president, conceded Friday that with his House counterparts’ strident opposition, the path forward is “murky.” Meanwhile, whispers in the State House about the potential for a government shutdown grow louder every day.
“At the end of the day, it’s time to close the budget,” Thibodeau said Friday. “ We are running out of time here.”
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