AUGUSTA — Democrats in the House and Senate presented their own proposal Friday for spending the state’s projected $200 million budget surplus, leaving Republicans without their demanded decrease in the sales tax.
The fact that it is an election year was hardly lost upon staff working for Gov. Angus King, who plans to present his own agenda for disposing of excess state revenues during his State of the State address Monday evening.
“There are parts of the Democratic plan that we like, but the governor will show people what he wants to do next week,” said Dennis Bailey, King’s communications director.
Democrats, who hold decisive majorities in the House and Senate, are staging a three-pronged strategy to distribute the revenue, the majority of which is one-time money that can’t be relied upon in years ahead. House Speaker Elizabeth Mitchell, D-Vassalboro, pegged sustainable increases in annual tax revenues at nearly $75 million, but Republicans, and even some Democrats, surmised the speaker was underestimating that figure.
The entire spending package advanced Friday by the Democrats is a $198 million plan divided almost evenly between initiatives that would invest in education, pay off the state’s bills and reduce property taxes.
“Maine’s overall tax burden is finally on a downward trend,” said Maine Senate President Mark Lawrence, D-Kittery. “It’s time to replace the gimmicks of the past with long-term fiscal responsibility. The challenge facing us now is how to use this budget surplus to build an even stronger future for Maine’s families.”
In the area of education, Mitchell proposed establishing a $20 million school loan fund, allowing Maine’s public schools to borrow needed money to improve air quality and make structural repairs. The Democrats also want to boost the state contribution to municipal education (called General Purpose Aid) by $16.8 million, a proposal originally backed by Republicans last year.
“It’s the least we can do, given the opportunity we have to invest some of our funds,” Mitchell said. “It’s an opportunity to make sure that our schools offer the programs that we need to offer so that our young people can compete in this environment, but it’s also an opportunity to give direct property tax relief.”
Two other components of the $65 million education plan include money for research and development grants and improved access to higher education through programs that could include college savings plans and prepaid tuition plans.
Under the paying-the-state’s-bills category, Lawrence vowed Democrats would set aside $65 million to strengthen the state’s Rainy Day Fund, make extra contributions to pay down the unfunded liability within the Maine State Retirement System, and honor unmet obligations to state institutions such as the Maine Youth Center and programs such as home-based care for the elderly.
“The next step in building a strong future for Maine’s families is to pay our bills,” said Lawrence. “By paying our bills today, we can prepare for the inevitable of tomorrow and that’s an economic downturn. In the late 1980s, we were not prepared for the recession and since then, we’ve been paying the price.”
The final and perhaps most innovative facet of the Democratic initiative calls for lowering property taxes with a $7,000 homestead exemption for resident homeowners. The exemption would be taken right off the top of a homeowner’s municipal property tax, so that an $87,000 home would be taxed by the community at $80,000. If the homeowner’s property tax was fixed at 100 percent valuation at $20 per thousand, the local tax paid would be decreased by $140. The plan would cost the state $35 million.
The second aspect of the tax reduction strategy, and one which is favored by King, would cut state income taxes for families by raising the minimum personal exemption to match the federal level. Currently, the state minimum exemption is $2,150 while the federal is $2,700. This savings to taxpayers would cost about $33 million.
“These two cuts combined will do more for almost every single income group in Maine than a one-penny reduction on the sales tax,” said Senate Majority Leader Chellie Pingree, D-North Haven.
Maine Republican Chairman Kevin Keogh said it was odd that Democrats doubted there was enough money to fund the $120 million, 1-cent sales tax cut but enough cash to bankroll all of their programs.
“What the Democrats are essentially saying is, `Give us the money and then we’ll decide what we’re going to do with your money,’ and we’re saying, `We shouldn’t take the money from the taxpayers to begin with,”‘ he said. “It was a promise made some years ago to roll the temporary sales tax back to 5 percent. The argument that we can’t afford it is specious and incorrect. It’s time to give the money back to the people of Maine.”