Tue, Sep 30, 2014 ●
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Policy Wonk: What’s mine is mine, what’s yours we’ll compromise

Opinion

Policy Wonk: What’s mine is mine, what’s yours we’ll compromise

The LePage administration began with the assumptions government is too big, and reducing it requires existing taxes (state revenues) to be cut, no new taxes, and budget cuts to unleash the power of individuals and corporations, who in turn will create jobs, and grow the economy.

The fact that there is no empirical evidence to support any of these assumptions does not trouble the governor and his true believers.

LePage’s 2011 budget, with the support of a Republican Legislature, proposed more than $200 million in annual tax cuts (mainly for the wealthy) and deep cuts in existing welfare programs that benefit the poor, elderly, and handicapped individuals. Never mind that Maine has a disproportionately high number of poor people and the highest percentage of elderly people of any state in the nation.

Democrats in the Legislature, groups representing the poor and elderly, and a growing chorus of public voices, resisted. LePage grudgingly reduced his proposed tax cuts slightly – some cuts were gradually phased in and welfare budget cuts were scaled back slightly – and finally, teacher and state employee retirement benefits were shamefully reduced to provide the revenue needed to balance the 2011 biannual budget.

This so-called “compromise” is now a permanent part of Maine law. But it has not turned the economy around; the state’s economic malaise continues. What the tax cuts did create was a $400 million dollar revenue gap the governor and Legislature had to close to balance the 2013 biannual budget.

LePage, true to his assumptions and his “what’s mine is mine” operational strategy, indicated from the outset that there would be no rollback of 2011 tax cuts, no stretching of the time period for implementing these cuts, and no new taxes, fees, or revenue gathering measures. Instead, he proposed to bridge the revenue gap by ending the state’s revenue sharing program, cutting state school aid, further cuts to state welfare programs, and some modest reductions in state subsidies and/or tax exemptions.

Aside from the harm this approach would again visit on Maine’s poor, elderly, and handicapped population, this approach shifts the burden of maintaining public education, and a wide range of local needs – water, sewer, public works, solid waste, etc. (all funded in part by revenue sharing dollars) – onto municipalities. In LePage’s view municipalities can simply raise property taxes to maintain any or all of the programmatic needs they value. It’s a cynical strategy. He knows that most Maine towns do not have the property tax base to meaningfully exercise this option.

Democrats, who in 2013 controlled the Legislature (but not by a veto-proof majority), and groups representing education, poor and elderly people, pushed back hard. A wide range of tax proposals were brought forward. The boldest (including the bipartisan “Gang of 11” proposal) never made it beyond discussion in the Taxation Committee. Some came to floor votes, but were not adopted. A handful were sent to the Appropriations Committee, where they became part of a unanimous and bipartisan budget package – a grand compromise.

This compromise budget was ultimately adopted by the Legislature and vetoed by the governor. But LePage’s veto was dramatically overridden when 30 Republicans voted for the Appropriation Committee’s compromise budget.

Since then, much has been made of this bipartisan compromise. The patience and courage of Democratic and Republican members of the Appropriation Committee has been lauded. And there is general consensus that approving the compromise budget produces a far better outcome than either approving or simply rejecting the LePage budget. The legislative leadership on both sides of the political isle must also be given credit for marshaling the votes needed to override the governor's veto.

That said, Democrats and the public must recognize that LePage’s strategy has worked. His 2011 welfare cuts and tax cuts are permanent (a biannual $400 million dollar revenue loss). The 2013 “grand compromise” slightly raising sales, meal and lodging taxes will generate approximately $146 million biannually, but these tax increases expire in two years. Another $70 million in revenue (presumably non-lapsing) is produced by ending some sales tax exemptions and limiting income tax deductions. Bottom line: in 2015 we will again face a significant revenue gap, and depending on the economy, we’ll be more or less where we were a month ago.

In the interim, the $216 million in compromise state tax revenues will allow revenue sharing to be partially restored. State school aid will be cut less sharply, and some important welfare programs will be preserved, but property taxes in many, if not most, Maine towns will almost certainly have to be raised to cover essential municipal services.

In short, the governor has given up very little – not on taxes, and not in other areas that divide Democrats and Republicans. The hospital debt will be repaid on LePage’s terms, and Maine will not participate in Obamacare’s expansion of health care coverage. Fifty-one legislative enactments (many with broad bipartisan support) were vetoed by the governor, and his veto was sustained 48 times by flip-flopping, no-compromise Republican legislators.

The Democrats, on the other hand, have been “compromised” in 2011 and 2013.

This can’t go on. They need to take a stand or there will be nothing left of responsible state government.

That stand should be taken on expanded health-care coverage. Use the initiative process; get the needed signatures before the Legislature meets in January; force a legislative/voter reconsideration of this vital issue. If expanded health-care coverage is approved, the looming 2015 tax and budget issues are more likely to be addressed responsibly.

If the initiative fails, Democrats and Maine people face a grim future.