AUGUSTA — Leaders in the majority Democratic caucus of the state Legislature said Wednesday that new revenues and a "fair tax system" would be part of a "big conversation" they hope to have as they look to craft the state's next two-year budget.
That message came just a day after Republican Gov. Paul LePage implored lawmakers during his State of the State speech to hold the line on state taxes and to not roll back a series of state income tax cuts that were enacted in the last lawmaking session.
Democrats have been nondescript in exactly how they would raise new revenue or create a fairer tax system.
Senate President Justin Alfond, D-Portland, during a press conference Wednesday, agreed the caucus has been intentionally "vague" on the topic.
"You're right. We are being vague," Alfond said to a reporter's question about tax policy. "We are going to have many, many months to talk about the tough cuts, finding efficiencies, a fair tax system and revenues – so more to come on that."
Alfond said lawmakers needed to first focus on passing a supplemental budget that deals with a $112 million revenue shortfall in the state's current budget. That work needs to be completed within the next two weeks, Alfond said.
After that, he said, they would dig deeper into LePage's two-year proposal.
Alfond also reiterated that LePage's two-year budget proposal does increase taxes.
"Mainers need to know, across the state, that in the governor's budget he has a tax increase," Alfond said. "He eliminates (income tax) indexing – that's a tax increase. The property-tax shift that he has included, that's a tax increase. He is suggesting now is not the time for taxes but in his budget he is raising taxes, so we just have to be honest about the proposals he's put forth."
Speaker of the House Rep. Mark Eves, D-North Berwick, said lawmakers have been wondering how LePage planned to pay for the tax cuts enacted in the previous session.
"And that is an enormous tax shift onto the middle class, seniors – those that can least afford to pay it are being asked to take the burden on a tax cut that largely benefits the wealthy," Eves said. "We are going to have a healthy discussion around a fair tax system, that will be part of the debate."
Eves said Democrats would be looking for alternatives to property tax increases that could disproportionately impact the elderly and working class. "To shift taxes onto the middle class, small business owners and seniors who will be priced out of their homes because they are on a fixed income is unacceptable."
House Minority Leader Rep. Ken Fredette, R-Newport, said the Democratic response was expected.
“It comes as no surprise that Democrats continue talking about raising taxes to fund an ever-growing bureaucracy," Fredett said. "Republicans stand for government that operates within its means, and it’s unfortunate that Democratic leadership continues to stick its hands in the pockets of Maine people."
LePage has also put forward a plan to pay down the state's more than $484 million debt to hospitals. His proposal would use revenue from a new contract with a company that would run the state's hard-alcohol distribution and sales business to make payments on a state-issued revenue bond.
But Democrats said Wednesday that the state has been steadily paying the debt to hospitals and that they want to keep the discussion on that and what to do with any new revenue from the state's liquor business distinct.
"From Day One, Democrats have said these are two different issues," Alfond said. "I think what we see coming out of Washington, D.C., when we see these complex deals, that one thing relies on the next which relies on the next has turned into no action in Washington, D.C."
He said Democrats were equally interested in fully paying down the state's debt to hospitals, which basically has resulted from the state failing to fully pay for services being rendered under the shared state and federal Medicaid program.
On Tuesday night, LePage was direct in saying, "It's embarrassing to work for a state government that doesn't pay its bills."
But Alfond said Wednesday that LePage's plan for paying that debt down was far from a slam-dunk, especially with Democrats.
"The liquor contract is something we want to keep all options on the table," Alfond said. "It's an important asset to our state and we want to make sure we get the best financial deal for the state of Maine."
He said Democrats believe the hospital debt and paying it off is "really, really important." But he said that state obligation needs to be balanced against others.
"We also can't say that priority is the only priority that our state is facing," he said. Alfond mentioned the state's ongoing inability to fund public schools at the 55 percent level promised them in state law.
The state's judicial system was also not being fully funded, Alfond said.
But he and his fellow Republicans don't see the hospital debt and the liquor contract as separate issues, Fredette said.
"In 2004, Democrats sold this state asset at a firesale price to cover welfare spending overruns," Fredette said. "I’d rather see us do something responsible with that revenue this time around, such as pump $600 million into Maine’s economy while finally settling our debt to some of Maine’s largest employers.”
Alfond also elaborated on a short meeting with LePage held earlier in the week. LePage met with leaders in both parties, including Alfond.
Alfond indicated that some of the tension between the governor and Democratic leaders in the Legislature may be easing and that LePage left the door open for future meetings.
"It was a great meeting, there was probably more laughter in that meeting than anything else, we talked about our families, we talked about golf," Alfond said. "We talked about all the issues he talked about at the State of the State."
Alfond said LePage also indicated he knew they would not agree on many issues but that they had all vowed to continue the debate and discussion in a professional and civil fashion. "We know we can work with this governor," Alfond said of LePage.
Eves said the meeting was long overdue and was the minimum expectation of Maine people.
"The problems that we face are too big for one political party to solve alone. We know that," Eves said.