At first glance, the biennial budget proposal Gov. Paul LePage plopped on the Legislature’s desk seems to be a joke — and not a good one. Who would have imagined that a Maine governor could look at a massive shortfall in revenue and decide that it’s towns and cities that must make the tough calls to raise taxes or cut spending?
That’s exactly what LePage proposes – to take a cleaver and chop off just about every property tax relief program Maine has invented, and there are many, with the large exception of school funding. In all, he wants to eliminate $420 million in payments to towns, cities and individual taxpayers, zeroing out revenue sharing, the homestead exemption, the circuit breaker except for seniors, and impose major cuts on most others.
As the governor’s critics have noted, this just about equals the unfunded part of the state tax cut package enacted in 2011, but most of it taking effect only this year. LePage and his Republican allies are daring Democrats to propose delaying or canceling the tax cuts, to then proclaim this would “raise taxes.”
But playing the “raise taxes” game misses the central point: The state doesn’t have enough money to run its basic programs and provide the required amounts of aid to towns, cities, and individual taxpayers.
State departments have been steadily reduced; vacancies are rarely filled. Most state employees haven’t had a pay raise, even cost of living, in five years. The larder is bare.
Nor is the problem a new one. LePage is following the path laid down by his predecessor, Democrat John Baldacci, who was every bit as allergic as LePage to anything that could have been described as a tax increase.
When Baldacci took office in 2003, he faced a structural deficit larger than those LePage confronted in either 2011 or 2013. He managed, somehow, to close the gap, but only through such major gimmicks as selling the state liquor store revenue stream; he wanted to do the same with the lottery. This permanently reduced future revenues, as did abolishing taxes on business equipment.
In 2009, after the national financial collapse, Baldacci was perhaps the only Democratic governor not to propose a tax increase. Earlier, he’d insisted the state could afford to “ramp up” to a voter-mandated 55 percent of school funding without ever identifying a funding source.
So when Republicans took over in 2011 bent on cutting taxes, they couldn’t have picked a more spectacularly bad moment. The numbers are painful. In current dollars, annual state revenue peaked at $3.4 billion in 2007 and has been declining since, to $3 billion for 2013.
Because politicians never talk about this, it would be easy for taxpayers to imagine the state is spending more money every year. In reality, for the next two years, we have $800 million less to spend than six years ago.
It’s crystal clear we can’t afford to keep tax cuts without devastating government services somewhere. It’s characteristic that LePage would simply pass the buck to municipal officials – something he’d be incensed about if he were still mayor of Waterville.
In a sense, the governor may be forcing a conversation we’ve avoided for a long time. While Republicans talk about Medicaid “eating the budget,” though the federal government pays most of the bills, and Democrats avoid budget talk altogether, the reality is that municipal and individual property tax relief programs, including school aid, consume almost half the state budget – a high proportion.
At a time when sales and income taxes brought in healthy revenues, an era which ended a decade ago, those transfer payments from state to towns, individuals and businesses worked well enough. But unless lawmakers change course sharply, there’ll never be enough money to meet statutory levels again.
There are alternatives. Most states provide municipalities and counties with the ability to levy local option taxes, on sales and sometimes income. Municipalities don’t have to rely solely on property taxes. The Legislature has regularly rejected local option tax bills, but if it’s not going to fund property tax programs, this approach has to be taken seriously.
But first we need a budget. LePage has served notice he’s not planning on being involved. Instead of explaining his budget in person, as previous governors have, he sent Finance Commissioner Sawin Millett. He still refuses to meet with the Senate president and House speaker and seems to avoid all but ceremonial occasions while delegating all the hard work to others.
This makes it imperative that legislative leaders of both parties start working together. Someone has to be the grownup in the room. Who will it be?