Remarks by Garrett Martin, MECEP Associate Director. Press Conference to Release Analysis of Governor LePage’s Budget

In a few minutes, the Legislature’s Joint Standing Committee on Administrative and Financial Affairs will begin hearings on Governor Paul LePage’s proposed state budget for the coming biennium.  We are here to express our concerns about this budget proposal and to highlight some key facts for Maine people and policymakers to consider.

First, we hear a lot about the need for shared sacrifice by all Maine people.  Unfortunately, this budget demands much of working families, seniors, retired teachers and state employees while giving huge tax breaks to Maine’s wealthiest residents.

This budget cuts property tax relief for working families while providing Maine’s wealthiest 1% of households, those earning more than $360,000 dollars, a $2,700 dollar tax cut.

It freezes health care funding for thousands of working parents and prescription drug assistance for seniors to save approximately $30 million dollars, while giving away $30 million dollars in tax breaks to Maine’s 550 largest estates

It undermines the retirement security for teachers and state employees to fund over $200 million dollars in tax breaks, 50% of which benefit households earning over $120,000 dollars.  For a retired teacher or state worker who draws an average of $18,500 dollars from their pension and is being asked to sacrifice cost of living increases in order to provide tax breaks for Maine’s wealthiest residents, this can hardly seem fair.

Second, this budget fails to live up to Governor LePage’s own campaign promises and jeopardizes essential investments in Maine’s infrastructure and communities.

On the campaign trail, Governor LePage pledged to boost state education funding to the full 55% voters approved in 2005.  This budget doesn’t even come close to that.  In fact, General Purpose Aid to Education from the General Fund will be lower in 2013 than it was in 2006.  According to the Legislature’s Office of Fiscal and Program Review, this level of funding will fall approximately $137 million dollars short of the amount needed to attain the 55% threshold designated by Maine state law.

Governor LePage has also called this a “jobs budget” and has made a point of wanting Maine to be a good place to do business. 

Unfortunately, the Governor’s stated opposition to bond issues will not only undermine jobs but also curtail critical investments in Maine’s roads and bridges, schools, technology infrastructure and communities.  Cutting these investments now will hurt Maine’s immediate and long-term economic prospects more than providing tax breaks to Maine’s wealthiest residents will help.

Finally, this budget shifts costs in ways that will hit all Mainers.

State cuts to municipalities and continued failure to meet the 55% threshold for education funding will burden towns and likely result in higher property taxes. 

This budget forgoes broad based property tax relief for ALL in order to provide income tax relief that disproportionately benefits Maine’s wealthiest residents.  Worse still, it undercuts targeted property tax relief for lower and middle-income Mainers while providing income tax breaks at the top end.

Reductions in health care coverage, underfunding of higher education, and underinvestment in infrastructure will shift costs to businesses and individuals over time.  This will erode rather than enhance our economic prospects.

MECEP is today releasing “Tax Plan: Winners & Losers,” an overview of our analysis of the tax changes in the proposed budget that highlights these issues.

Our findings reveal that while the wealthiest taxpayers will receive a huge windfall from this plan, local governments, small businesses, state workers and retirees and working families will be the big losers.

Still we remain optimistic about the potential for solutions.  Maine families deserve a state budget that reflects their priorities and their values, that maintains public investments in our people and communities during good times and bad, and that promotes shared prosperity by guaranteeing sustainable and predictable revenues raised from a sense of mutual responsibility by all taxpayers.

Changing the income levels at which the top state income tax rate kicks in, expanding and making refundable the state earned income tax credit, and more robust and streamlined property tax relief are options that offer more to more Maine families and will aid in our economic recovery.

We call on the Governor and the Legislature to consider these alternatives and to review the tax breaks and program cuts contained in this budget that they apply to their review of government spending. 

Only then will we have a budget and tax system that benefits the majority of Mainers, provides a predictable revenue stream for critical public investments, and positions us for economic success.

Garrett Martin is associate director of the Maine Center for Economic Policy.