April 07, 2020

Democrats fine-tune fiscal package

AUGUSTA — Democratic lawmakers Thursday prepared the unveiling of a majority party plan for using close to $200 million in surplus state revenue that focuses on paying off bills and paying down future liabilities while offering new investments in education.

The Democratic proposal, scheduled to be presented Friday, was also said by House and Senate sources to feature tax-reduction initiatives including an increase in the personal income tax exemption and the creation of a homestead exemption.

The King administration, meanwhile, offered details of Gov. Angus King’s own agenda in advance of Monday’s State of the State address, unveiling a bond package that would raise $61.5 million for the General Fund and $14.5 million for the Highway Fund.

The package — to finance environmental and transportation projects, land conservation and several science and technology initiatives — includes no borrowing for a major prison system overhaul that King has embraced.

“Financing of that plan will be in the governor’s proposal. … It definitely won’t be a bond,” King aide Kay Rand said.

According to the State Planning Office, the bond package King will propose would generate $93.6 million in matching funds.

As state finances continued to preoccupy the administration and much of the Legislature, the House chairman of the Appropriations Committee pushed King aides to spell out why Maine’s revenue stream could not absorb a full penny reduction in the state sales tax.

The sales tax cut has been adopted as a top priority by legislative Republicans, but it was Democratic Rep. George Kerr of Old Orchard Beach who grilled administration finance officials and reiterated his own preference for a 1-cent cut on the 6 percent sales levy.

King and a number of other Democratic lawmakers have sought to cast doubt on how the state could cover annual revenue losses of $120 million if the sales tax were reduced to 5 percent.

Kerr maintains that revenue trends appear strong enough to offset the full penny cut, with perhaps some adjustments or phasing in, although he challenges Republican suggestions that such a reduction in revenue would allow for still other spending initiatives.

“I’ve got to be shown that it can’t be done,” Kerr told King budget chief Janet Waldron.

To date, Kerr said, the debate has been framed as a matter of “we can’t afford something.”

Asserting that “I believe we can,” Kerr counseled opponents of a sales tax cut to accept his reading of revenue trends in declaring their position.

“Let’s say we can afford it, but we don’t want to do it,” he said.

Waldron said state finance officials were keeping a close eye on tax collections because, “of course, the governor’s had the same kinds of questions.”

In analyzing what the future revenue stream will be, Waldron said, “obviously the real distinction is what is available on an ongoing basis.”

Kerr’s co-chairman, Democratic Sen. Michael Michaud of East Millinocket, said he sided with those opposing a sales tax cut.

“No, I don’t support it,” Michaud said. “Not until we start paying our bills and taking care of other things … particularly the unfunded liability for the retirement system.”

Recalling the recession-caused revenue contractions early this decade, Michaud said, “I don’t want to go through that process again four or five years down the road.”

The pending Democratic presentation coincides with a marked change of approach for the Taxation Committee on the surplus revenue issue.

After months of gearing up to present its proposals to the full Legislature, committee members were told this week the panel would at least for now adopt a lesser advisory role.

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