June 21, 2011

LePage signs budget

Governor calls plan ‘a step toward fiscal responsibility’

By Susan M. Cover scover@mainetoday.com
State House Bureau

AUGUSTA -- Gov. Paul LePage ended days of speculation Monday by signing into law the $6 billion state budget for the two years that start July 1.

"It's a validation of the great work of the Appropriations Committee," said Senate President Kevin Raye, R-Perry. "It reflects the core values of (LePage's) original budget."

Raye said the budget includes "the largest tax cuts in the history of Maine," pension reform and welfare reform.

In a statement released Monday afternoon, the Republican governor called the budget "a step toward fiscal responsibility."

"I am encouraged by some of the work done and the thoughtful debates that were involved during this budgetary process," he said. "The state will now move toward a more sustainable pension system that Maine can afford and current and future retirees will benefit from."

The budget passed easily last week in the House and Senate. Before the budget went to lawmakers for votes, the Legislature's Appropriations Committee revised LePage's original proposal in three key areas: the pension system for teachers and state workers, taxes, and welfare programs.

While LePage did not say he would veto the budget, his spokeswoman said last week that he would examine it closely, particularly regarding welfare reform.

Maine's Constitution gives the governor 10 days to decide whether to sign or veto the budget; LePage took less than half that time to sign it.

The budget seeks to address short- and long-term debt in the pension system by freezing cost-of-living increases for retirees and paying out the increases only on the first $20,000 of annual retirement income. It caps future increases at 3 percent.

A $150 million package of tax cuts lowers income taxes, gives tax breaks to fishermen and redemption center owners, creates tax credits for businesses and increases the estate tax exemption from $1 million to $2 million.

The changes mean that 70,000 low-income Mainers will no longer pay any state income taxes. The average tax cut in 2011-12 will be $243, and the average cut the next year will be $343, according to the governor's office.

For welfare reforms, the budget allows legal noncitizens who now receive benefits, and those with applications pending as of July 1, to continue receiving food stamps and federal welfare money. An estimated 1,550 legal noncitizens will lose Medicaid health insurance if they have not lived in the U.S. for at least five years.

LePage expressed concern last week that the budget wouldn't do more to reform the state's welfare system. In his prepared statement Monday, he reiterated that point.

"We must continue to make these types of changes to the system, not only to achieve significant savings, but to encourage Mainers to become self-sufficient," he said. "This is a down payment on welfare reform and, after implementing these changes and gauging the results, I look forward to doing more."

Consistent with one of LePage's goals dating back to last year's gubernatorial campaign, the budget cuts off federal money for Temporary Assistance for Needy Families after five years.

The budget also freezes state employees' pay for two years, and will not extend longevity payments to anyone who isn't already receiving them.

Although LePage proposed eliminating all state funding for the Maine Public Broadcasting Network -- $4 million over two years -- the Legislature restored all but $200,000 of the funding.

The budget makes use of a $20 million down payment on the state's new wholesale liquor distribution contract and designates how money from the contract will be used. It also creates a return-to-work option for state workers and teachers, allowing them to come back to service at 75 percent of pay for as long as five years.

The new law requires a 12-member panel to find $25 million in savings for the second year of the budget. The panel will include four lawmakers, two people representing businesses, two representatives of nonprofits, two members of the public and two state bureaucrats.

House Speaker Robert Nutting, R-Oakland, said in a prepared statement that he was "delighted" that the governor signed the budget.

"This budget also includes no cuts to education or programs that protect Maine's most vulnerable," he said. "It's also free of gimmicks like state shutdown days."

Susan Cover -- 620-7015

scover@mainetoday.com

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