March 28, 2024
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Panel OKs $1 tax hike on cigarettes Dems propose $125M in cuts

AUGUSTA – Majority Democrats on the Legislature’s Appropriations Committee repealed a $250 million, budget-balancing loan Tuesday, replacing it with $125 million in spending cuts and a $1 hike in the state cigarette tax.

At $2 per pack in taxes, Maine would have the third highest cigarette tax in the country, according to Dan Riley, an Augusta-based lobbyist for the tobacco industry. The increase would effectively drive up the over-the-counter price for a pack of premium cigarettes like Marlboro from $4.19 to $5.19.

“We have selected some new revenue to bring us to the $250 million target,” said Sen. Peggy Rotundo, D-Lewiston and co-chairman of the Appropriations Committee. “We cut as far as we felt we could.”

Gov. John E. Baldacci said Tuesday he will support the cigarette tax increase as the best available solution to eliminating the $250 million state revenue bond included in the two-year, $5.7 billion state budget to take effect July 1. Like the 8-5 vote on the budget panel Tuesday, the state budget was advanced in March by majority Democrats who believed the $250 million loan was an acceptable alternative to deep spending cuts in state programs.

The proposal now goes to the printer, where it will be assigned an LD number. Legislative leaders essentially abandoned a planned Wednesday adjournment and anticipated debate on the new tax-and-spending package would begin sometime Thursday in the House.

Republicans on the panel have prepared their own proposal to reach the $250 million target that relies on severe cuts to state health care services and defers salary increases to state employees. The package also restores numerous proposals that were rejected by Democrats on the Appropriations Committee.

“A lot of our initiatives are about the size of state government and the costs associated with state employees,” said Sen. Richard Nass, R-Acton and the senior Republican on the budget panel.

Republicans were essentially bypassed by Democrats in March when the majority budget was passed. The GOP responded by launching a people’s veto of the borrowing component with the hope of overturning the provision at the ballot box in November. About 40,000 of the required 51,000 signatures have been gathered, according to Sen. Peter Mills, R-Skowhegan. In response to Tuesday’s vote by the Appropriations Committee, Mills indicated final approval by the Legislature of either proposal to eliminate the borrowing provision of the budget was all that was needed to terminate the people’s veto effort.

“When it looks like this has passed in the House and Senate, we’ll declare victory and the signature-gathering effort will stop,” Mills said.

In a closely divided House and Senate, however, such conclusions cannot be presumed lightly. Republicans and some Democrats were not sure how the majority report from Appropriations would be received by rank-and-file Democrats in the House. The Democratic plan:

. Cuts $10.4 million from mental health programs by revamping the delivery of those services.

. Saves $5.9 million by delaying school construction projects by one year.

. Cuts $2.2 million from the DirgoHealth program.

. Cuts $5.5 million from the Veterans Tax Reimbursement program.

. Cuts about $7.2 million from the Business Equipment Tax Reimbursement program.

By contrast, the GOP plan:

. Delays $20 million in state employee salary increases until the next budget cycle.

. Cuts $20 million in health care services to poor working Mainers.

. Transfers $32 million from the DirigoHealth program to the General Fund, leaving DirigoHealth with a balance of about $6 million.

. Eliminates the governor’s Office of Health Policy and Finance with a $2 million deappropriation.

. Eliminates the reduction to the BETR program proposed by Democrats.

Rotundo said Democrats could not support the level of cuts Republicans wanted to make to the state’s social service programs.

“In order to cut more we were going to have to get into those programs that provide health insurance for some of the poorest people in the state – the working poor,” she said. “We just didn’t want to go there. We did not want to remove thousands of people from programs that were providing them with some kind of health care.”


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