April 07, 2020

Mitchell lays out agenda > Fate of surplus focus of Legislature’s opening day

AUGUSTA — Infusing her leadership role with renewed vigor, Maine House Speaker Elizabeth H. Mitchell opened the final session of the 118th Legislature Wednesday by setting the agenda for dispensing more than $200 million in state surplus tax revenues.

“None of us in this debate will get everything that we want,” Mitchell said. “The budget surplus simply isn’t large enough to satisfy all of the worthy ideas that have been proposed. Therefore, I propose that three principal goals guide us in allocating the surplus.”

The Vassalboro Democrat urged members of the state House of Representatives to support bills aimed at strengthening the state’s finances by paying off debts and setting aside some of the surplus for investment. She supports increasing contributions to the state’s Rainy Day Fund, paying down the unfunded liability within the Maine State Retirement System, and upgrading many state facilities, including the State House.

In her final opening address to lawmakers — Mitchell is barred by Maine’s term limits law from seeking re-election to the House — the speaker also encouraged members of both parties to get behind bills that invest in education and relieve the pressure on local property taxes.

Citing a trend that began in 1990, Mitchell said state aid to community school systems has declined, resulting in gutted school programs or increased local property taxes.

“The education of our children and the condition of our schools have suffered,” she said. “I believe we must increase K-12 school funding at least to the statutory obligation of 5 percent and, in addition, create a revolving loan fund to help communities pay for school repairs.”

Less clear are Mitchell’s plans for providing tax relief to Maine residents. As a result of the several power generating stations being sold by Central Maine Power Co. for $846 million, the state will receive an unexpected tax windfall of between $50 million and $60 million. Although the state is not expected to receive that sum until the next fiscal year, it is money the Legislature can add to this year’s overall state tax revenue surplus that could reach $235 million even without the CMP tax windfall.

But as Mitchell, Gov. Angus S. King and Maine Senate President Mark Lawrence, D-Kittery, observed Wednesday, all but about $85 million of that figure is represented by one-time money that can’t be relied upon in years ahead.

With the exception of Republicans, the Democratic leadership in the House and Senate along with Maine’s independent governor seem to agree that now is not the time for a 1-cent reduction in the state’s 6-cent sales tax. Mitchell did not specifically mention the sales tax cut in her brief comments concerning her third goal: “financially sound, direct tax relief.” But she did warn against formulating unrealistic goals.

“The one-time tax rebate of 1990 proved the folly of excessively cutting taxes one year, only to fall victim to a budget crisis the next year,” she said. “We must ensure that any tax cut is affordable and sustainable in the long run and does the most good for the most people.”

That news did not make House Republican Leader James O. Donnelly of Presque Isle very happy. He and the GOP caucus in the House and Senate have been supporting a reduction in the sales tax as a credibility issue since lawmakers promised that the extra penny was only temporary when they increased the tax in 1991.

As he joined his seatmates in giving Mitchell a standing ovation at the conclusion of her remarks on session priorities and the accomplishments of the 118th Legislature, Donnelly couldn’t help but notice that the speaker seemed to exude new levels of enthusiasm.

“It was definitely a speech that went beyond your normal `welcome back’ presentation,” he said. “And it definitely laid out her priorities.”

Republicans never got a chance to present their goals for the session from the House floor. Mitchell called members of leadership up to the rostrum immediately after her address and subsequently adjourned the lawmakers. The GOP had a backup plan, however, and quickly convened a press conference in the State House Museum.

Lashing out at the 6-cent sales tax, Donnelly said Maine people would no longer trust their representatives if the Legislature failed to impose the 1-cent cut.

“To violate that trust is to validate the cynics,” he said. “I can’t look into the eyes of my two little boys and say, `I can’t keep my promises, but you should believe Daddy.”‘

Additionally, Donnelly said lawmakers would still be able to hike spending on education and bolster the Rainy Day Fund.

Speaking to reporters from his office, Lawrence said he would not be inclined to sign on to any tax relief package that cannot be sustained by the state. Although the figures lawmakers are looking at are comparatively rosy next to those of years past, Lawrence pointed out Maine continues to lag behind the rest of the country.

“This surplus is less than 5 percent of our budget and if you look at the surpluses that other states are running, and virtually every state is running a surplus, we are well behind where other states are,” he said. “This is not the time to begin having dramatic plans of changing a lot of things when we haven’t met the fiscal responsibilities that we need to meet.”

A 1-cent reduction in the sales tax would cost the state about $115 million a year which, at today’s revenue flow, would automatically obviate the need for cutbacks in other areas.

“The bottom line is that we have about $30 million from the cigarette tax and about $54 million in ongoing surplus,” King said. “The question is: Do you make a permanent every-year change based upon money that you won’t get every year?”

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