March 3, 2011

Hearings begin on $6.1B LePage budget

Glenn Davis, The Associated Press

AUGUSTA — Hearings on Gov. Paul LePage's $6.1 billion budget package opened today with a focus on taxes, and advocates were quick to weigh in with support for a package they said will stimulate business, while opponents said it would foist unfair burdens on those who can afford it least.

During a joint session before the committees on appropriations and taxation, Finance Commissioner Sawin Millett said the Republican administration faced difficult choices as it tackled spending and tax priorities, particularly with the end of federal stimulus funds that bailed the state out of a previous budget shortfall and a $4.4 billion unfunded liability in the pension system hanging over the state.

State department requests for the two years that will begin July 1 are reflected in "Spartan" changes in the budget, he said. At the same time, it cuts $203 million in taxes and saves $413 million in general fund spending over the two years for the pension liability.

Millett, speaking from a wheelchair as he recovers from knee surgery, described the budget as a "new reflection on the approach we want to take with taxpayers." Not everyone agrees.

Garrett Martin, associate director of the liberal Maine Center for Economic Policy, said it concentrates tax cuts on the wealthiest taxpayers, cuts property tax relief in the so-called Circuitbreaker program, freezes health care and prescription drug assistance for thousands, and falls far short of the goal of 55 percent state funding for public schools.

"Unfortunately, this budget demands much of working families, seniors, retired teachers and state employees while giving huge tax breaks to Maine's wealthiest residents," said Martin. The budget would lower the top income tax bracket from 8.5 percent to 7.95 percent, which the administration calls its lowest level since 1975.

State workers are upset with three years' proposed freeze in pensions, raising the retirement age for new hires from 62 to 65 and increasing the workers' retirement contributions by 2 percent.

"The governor proposes largely balancing the state budget on (state workers') backs," said Ginette Rivard, vice president of the Maine State Employees Association, which represents 15,000 workers.

Maine property taxpayers will end up bearing the brunt of changes the budget proposes in municipal revenue sharing, said Augusta City Manager Bill Bridgeo, who joined Rivard and Martin at a news conference. The budget proposes changing the payments from a fluctuating formula to set appropriations, resulting in millions of dollars in cuts to communities.

But others told the legislative committees that changes sought by LePage will set a fiscal policy that's beneficial to job-creating businesses, through such changes as an increase in Maine's estate tax exclusion from $1 million to $2 million, and conforming with federal tax policy on some items.

"It will truly make Maine a more affordable place for entrepreneurs and families," said Carol Weston, of Americans for Prosperity, a nonprofit group that advocates for entrepreneurs. "This is a tax package that is for all of Maine," said Weston, a former state senator.

The budget "makes progress toward putting Maine more in line with other states" in how it taxes companies, said David Clough of the National Federation of Independent Business.

One small-business owner, Will Neilson, of Solo Bistro, in Bath, said he's disappointed with a provision to cut out funding for Dirigo Choice, the state subsidized health insurance program that was created under former Democratic Gov. John Baldacci. Neilson said his business and many others will lose an option to insure their employees.

Neilson said the budget "represents the triumph of political ideology over good sense."

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