MECEP Newsroom
Balanced Approach will Balance Budget Wednesday December 30th, 2009 Dan Coyne
Times Record
With just about every state in the nation facing record-breaking
budget shortfalls, no one really knows what the “new normal” will be in
state fiscal policy. With tax revenues substantially down and
unemployment up, fiscal coffers are not going to fill up anytime soon.
The economic heyday of the last few decades is over.
Treading
water or putting our heads in the sand until the good times return is a
disservice to the people of Maine. It’s time to put our fiscal house in
order and lay the foundation for Maine’s future.
It’s really
unlikely that Maine people will accept a “new normal” whereby
policymakers “solve” revenue shortfalls with only deep cuts to
essential public services like schools, higher education and property
tax relief. This is recession-fighting policymaking with one hand tied
behind your back. This approach to tackling a budget shortfall only
reinforces the economic crisis and does little to speed recovery and
position Maine to prosper.
In times of economic uncertainty with
workers unemployed or fighting to keep their jobs, families spend less
and, if possible, save more. The decline in spending and increase in
saving results in declines in state revenue, which are heavily
dependent upon income and sales taxes.
The decline in state
revenue then usually results in cuts to state budgets, which fund
critical programs such as those that provide health care, education,
and workforce development. The shrinkage of essential services results
in less support to workers and families who are struggling to get by.
And the cycle repeats itself.
Unfortunately,
this cyclical problem is a reality in Maine. Consequently, despite
adoption of a biennial budget approximately six months ago that
witnessed deep cuts to critical programs that support Mainers, Maine
once again must make difficult choices to address a $438 million
revenue shortfall.
The proposed supplemental budget, however,
does not really make meaningful choices. By calling only for more deep
cuts to important public services, it’s pitting Maine families with
some needs against Maine families with other needs and not doing
anything to create a stable economic future for Maine.
For
example, the proposed budget reduces higher education investments by
$15.9 million, including funding for the Maine Community College System
and the University of Maine System, thereby limiting Mainers’ ability
to acquire new skills and advanced degrees. The proposed budget lowers
the income eligibility limits of the Circuit-breaker program for single
member households from income of $60,000 to $36,900 or less and for
households with two or more members from income of $80,000 to $49,200
or less. The proposed budget also aims to reduce Department of Health
and Human Services funding by $67.8 million, which will lead to
decreased access to services for many, including the elderly.
Of
course, inefficiencies in the provision of government services should
be addressed, but pitting health care, education and other worthy
programs against each other to see which is cut less, which more, is
not really a choice that protects Mainers or positions Maine to recover.
Appropriate
government spending works. The American Recovery and Reinvestment Act
has created jobs and kept roughly 22,000 Mainers out of poverty.
(Hopefully, Congress will soon pass a “jobs” bill that includes
additional fiscal relief for states).
History also suggests that
a cuts-only approach is not the panacea. Gov. John McKernan, for
example, proved that comparable shortfalls could be successfully
combated with a balanced approach that not only cuts government
spending but also increases revenues.
The Legislature should
consider short-term, emergency revenue increases, which would sunset
when Maine recovers, to combat this shortfall. Two possible options
include a surcharge on income taxes paid by those with annual incomes
over $250,000 and sales tax increases on items or services used most
often by higher income households. The result would be additional
revenues to help cover the budget shortfall, with the burden for the
revenue increases placed on those who are most capable of shouldering
it. Any potential increased tax burden on low, moderate, and middle
income taxpayers could be mitigated with a refund through the state
income tax and an expanded Circuit-breaker program.
More than
ever, Mainers need strong public investments in health care, higher
education and workforce development. It is time for the Legislature to
pass a supplemental budget that adopts a balanced approach that makes
some difficult decisions on spending but also considers temporary,
emergency forms of revenue increases, the burden of which will be borne
by those who can handle it.
We need a balanced approach to balancing the budget if we’re ever going to recover and prosper.
Dan Coyne is a fiscal policy analyst for the Maine Center for Economic Policy in Augusta.
letters@timesrecord.com
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