AUGUSTA — A new budget proposed by Gov. Paul LePage to keep the state’s two-year, $6 billion spending plan in balance contains a mix of cuts and new spending and proposes tax breaks for retirees and military personnel.

Some of the proposals are new, such as increasing funding for court security. Others have been rejected before and are being brought back, such as eliminating state funding for the Maine Public Broadcasting Network.

Republicans and Democrats said LePage’s proposal for the period through June 30, 2013, contains controversial proposals including significant changes to General Assistance that is distributed by cities and towns. In addition to new limits on who would be eligible for aid, LePage is proposing once again to cut the reimbursement level for larger cities such as Portland, Lewiston, Bangor and Augusta.

The budget also proposes tax cuts on pensions, a tax cut for active military personnel, and a tax break for wood harvesters and horticulturists. And it proposes to follow through with the elimination of 91 positions at the Dorothea Dix Psychiatric Center in Bangor.

Lawmakers, who were briefed for the first time Tuesday, said they were surprised by the size of the budget — with new spending and tax cuts totaling about $38 million — and by its scope, with policy proposals including the elimination of funding for MPBN and the changes to General Assistance.

Rep. Peggy Rotundo, D-Lewiston, said she had heard that most of the controversial proposals had been removed before the budget was released.

“If this is the noncontroversial budget, I’d hate to see what the controversial budget looks like,” she said.
Sawin Millett, the state’s top finance officer, gave members of the Legislature’s Appropriations Committee an overview of the budget proposal. Public hearings on it are set for Monday, Tuesday and Wednesday.

This is one of two major budgets that lawmakers must pass before they finish this session in April. The other budget would cut $100 million from the Department of Health and Human Services in 2012-13.

By proposing an income tax cut on pensions, LePage is keeping a promise he made last summer to reduce taxes on retirees. Because there’s no money to pay for the cut now, he is proposing to phase it in over five years beginning in 2013-14.

“The governor wanted to eliminate the pension income tax, but we just couldn’t find a way to pay for it,” Millett said.

The administration is asking lawmakers to increase the amount of annual pension income that’s tax-exempt from $6,000 to $35,000 over five years.

The cuts are projected to cost the state $28 million a year in lost revenue. Millett said the state will receive new revenue by renegotiating a long-term contract for liquor distribution, and that should cover some of the cost.
Democrats expressed concern that they are being asked to approve a budget that will create a deficit in future years. Rotundo called it “fiscally irresponsible” to propose tax cuts without a way to pay for them.
“It’s a reduction in revenue in the outlying years that will have a significant impact on (K-12 funding) and higher education,” she said.

In addition to MPBN, Rotundo said, she’s troubled by proposed cuts to public campaign funding for legislative and gubernatorial candidates.

Rep. Dennis Keschl, R-Belgrade, said significant policy changes are proposed in the budget, and he, too, is worried that the tax cuts aren’t covered. Among the difficult choices are proposed cuts to higher education and MPBN, he said.

Susan Cover — 620-7015
scover@mainetoday.com