Tax breaks for wealthy may beat out health, education, opioid response in Maine budget

Progressive groups are expressing disappointment in the ongoing negotiations over Maine’s state budget, which they worry may leave many of the key policies Democratic lawmakers passed this session without funding.

Lawmakers on the legislature’s Appropriations Committee are expected to soon reach a deal on a two-year budget that will then move to a floor vote and, if passed, on to Governor Janet Mills’ desk. In February, Mills unveiled a proposal for an $8.04 billion 2020-2021 biennial budget that gave lawmakers an idea of what she is willing to fund.

The administration’s proposal did not call for repealing the LePage-era tax breaks for high-income earners, and the committee is not likely to pursue other sources of new revenue, leaving many progressive priorities competing for a smaller piece of the pie, economists say.

“It was a colossal missed opportunity to not have revenue on the table,” said Sarah Austin, a policy analyst with the Maine Center for Economic Policy (MECEP). “That set up a situation where they were just cutting from the governor’s proposed budget, and really put the priorities of legislative Democrats in the shadows.”

A number of key progressive bills that passed this legislative session, some of which Democrats campaigned on, are at stake. These include a life-saving opioid harm reduction bill, a safe syringe exchange policy that passed this week, and a measure to modernize and expand the Earned Income Tax Credit for low-income Mainers, which passed out of the Taxation Committee with bipartisan support.

Also potentially left on the table is a bill to once again guarantee MaineCare health coverage for immigrants — many of whom were cut off from health coverage during the LePage administration.

“I think folks don’t follow all the bills through the budget process,” said Jeff McCabe, political director at the Maine State Employees Association. “I think people don’t realize that many of these bills are going to die on the Appropriations table.”

MSEA members are concerned that while members of the budget committee have discussed adding state employees to child protective services, proposals to add education staff will likely fall short. These staffing shortfalls are occurring during what McCabe describes as a crucial moment in the state’s unfolding challenge of recruiting and retaining staff, where many workers have left state government for the private sector due to non-competitive pay.

Full Medicaid expansion funding likely, while education could fall short

The Appropriations Committee is expected to meet the voter-mandated requirement to fully fund Medicaid expansion, reserving $146 million over two years to pay the 10-percent share of expanding MaineCare to nearly 70,000 Mainers.

Committee members have so far agreed to $250 million for municipal revenue sharing, a program designed to prevent town budgets from over-relying on regressive property taxes, which impact low-income people more than the wealthy. This is higher than the amount called for in Mills’ proposal, but still falls short of the full 5-percent sharing of state tax revenue mandated by current law.

Committee members are also expected to continue to underfund the state’s 55-percent commitment to Maine’s K-12 schools, which is another policy mechanism meant to shift funding dependance away from regressive property taxes. Mills, in her proposal, called for funding nearly 51 percent of local education costs and the committee is likely not going to exceed that amount. Education funding may instead settle nearer to LePage administration levels, which peaked at 49.5 percent.

While Mills called for starting all teachers at $40,000 a year, the revised budget is likely not going to reach that benchmark as quickly. Instead, the committee is considering a slower, phase-in policy that would bring starting salaries to that level by 2023.

On June 3, the committee moved $7 million designated for universal pre-K education out of the budget, replacing it with an unspecific plan to reach that goal in the future.

‘Robbing Peter to pay Paul’

Municipal revenue sharing and near 49.5-percent education funding comprise a significant share of the budget pie. While the committee exceeded what Mills called for in revenue sharing — though without addressing the inherited revenue constraints — that additional funding decreases what is left over for other passed legislation.

“Because there is no revenue increases to come with that — because they left tax policy more or less intact from where Governor LePage left it — that just means cuts elsewhere,” said Mario Moretto, MECEP’s communication director. “It’s kind of robbing Peter to pay Paul.”

He added, “If we’re not willing to tackle that revenue challenge, it creates problems everywhere else. You can’t continue to have budget conversations where you’re only looking at one half of the equation.”

In 2011, former Governor Paul LePage passed one of the greatest transfers of wealth in Maine history in his first budget. The budget included a significant cut to the state income tax, reducing the top tax rate from 8.5 to 7.95 percent. As a result of all the LePage-era tax cuts, which also included estate tax cuts and corporate carve-outs, Maine will see $864 million less in state revenue over the next two years than it would have without those tax breaks.

Progressives warn that continuing those tax cuts in the 2020-2021 budget will prevent Democrats from enacting many of the policies on which they ran.

“Healthcare is popular. Fully-funded schools are popular and voters support it. Fully funding revenue sharing is popular. Lawmakers have talked about it in the last decade in elections because it’s popular,” said Adam Goode, political director of the Maine AFL-CIO. “Voters have voted for all these things because they want them done.”

The Maine AFL-CIO is concerned that a number of pro-worker policies that have passed could also go unfunded. One, a law that would prevent laid-off workers from being forced to use all their vacation days before collecting unemployment insurance, has a relatively small fiscal note.

“Protecting very wealthy people with tax loopholes is not popular and not a priority compared to making sure people have a job to go to with dignity and respect, they can see a doctor when they’re sick, and their kids go to free, quality schools,” Goode added.

Paths for new revenue may still be open

Because a two-thirds vote is needed in both the House and Senate to move the budget to the governor’s desk, Republicans still have a significant amount of sway over this budget process, even with Democratic majorities in both chambers.

Republicans are reportedly negotiating to decrease the overall size of the budget. They are also reportedly drawing a hard line on funding abortion coverage through MaineCare.

For this reason, some progressive groups had previously urged Democrats to pass a non-emergency budget, which would have only required a majority in both chambers, but would have needed to have been completed in April, or 90 days before the end of the fiscal year.

Lawmakers will still have an opportunity to seek new revenue through separate tax-fairness legislation even after this budget is settled, however.

“We’re hopeful for what can happen after the budget,” Austin said, “hoping that progressives will be able to take leadership in funding these priorities that are being cut out of the biennial budget.”

Lawmakers have until the end of the fiscal year, June 30, to pass a two-year budget or face a potential government shutdown.

(Photo: Appropriations committee room at the Maine State House. | Dan Neumann)