AUGUSTA — Democrats and Republicans have until the end of June to enact a state budget but both sides see the biggest sticking point as a voter-approved tax on high earners to fund schools.

Democratic House Speaker Sara Gideon said a budget should be coming out of the Legislature’s appropriation committee by no later than June 5, and other lawmakers say they hope for a deal by mid-June. Lawmakers are working through GOP Gov. Paul LePage’s two-year, $6.8 billion budget proposal, which proposes income and corporate tax cuts along with a slashing of public assistance programs at a time of rising state revenues.

Republican House Minority Leader Ken Fredette says that there’s no room to compromise on his party’s opposition to the new 3 percent surtax on portions of household income above $200,000. LePage and several of Maine’s largest employers have said the tax is already creating the perception that the state isn’t a welcoming place for doctors, lawyers and other professionals.

“The real simple economics is we don’t want to be the highest taxed state in New England,” Fredette said.

Gideon said Democrats are open to nixing the tax and still providing increased education funding voters demanded last November.

But she added that they’re still waiting to hear Republicans’ ideas about how to provide such funding. Mainers in 2004 voted to require the state to pay 55 percent of the total costs of K-12 public education. Gideon said the state’s never fulfilled that duty and Democrats “won’t support a budget that does not fund education.”

With declining student enrollments and rising per-student costs, Fredette said Republicans want changes to the “status quo,” like a reworking of the highly complex school funding formula and lowered administrative costs. LePage has said just spending more money won’t fix schools, while taxation committee member Republican Rep. Bruce Bickford called the 55-percent goal a “moving target.”

Republicans are also pointing to state revenue forecasts suggesting April income tax revenues were flat despite the new surtax. The latest forecast estimates revenues will reach $3.4 billion this fiscal year, about $16.8 million less than expected.

The May report said it’s unclear whether impacted taxpayers are shifting income or if the surtax masks a big drop in estimated income.

“Our belief is that we’re already seeing the impact of simply passing the referendum question,” Fredette said.

Democratic Sen. Troy Jackson said revenue forecasts are “still very, very high.” He added that Democrats still feel they’ll be able to provide the property tax relief, increased education funding and student debt relief promised in their Opportunity Agenda, an alternative to LePage’s budget that includes such ideas.

The discord over the budget comes as the two parties have been working together on efforts to comply with federal ID law, pass new mining regulations and authorize a 5-mile turnpike connector between South Portland and Gorham.

As budget negotiations continue, the appropriations committee must still tackle issues from county jail funding to LePage’s tax proposals. Gideon said threats of a government shutdown at the annual peak of the Vacationland state’s tourism industry won’t get the two sides any closer.

“Any time somebody threatens a state shutdown it is irresponsible, it is unnecessary and it’s dangerous for every person in the state of Maine,” she said.

Copy the Story Link