Budget burdens
One down, at least two to go
- $100M more in Medicaid cuts eyed
- Revenue projections decrease
After a week's delay caused by squabbling Democrats at the Legislature, lawmakers passed and Gov. Paul LePage signed a budget that pays the Medicaid bills through the end of this budget year on June 30. But that is only the first of what will at least be three budget bills this session.
Members of the appropriations committee now tackle another bill to pay Medicaid costs in the second year of the two-year budget that totals over $100 million, according to Rep. Pat Flood, R-Winthrop, the panel co-chairman.
A third measure to pay non-Medicaid bills due this year grew when members of the state revenue forecasting committee slightly scaled back revenue projections, creating a hole of up to $14 million in the state budget that will have to be filled by a yet-to-be-released supplemental budget, the third spending bill expected to be released in early March.
“With a problem of that magnitude, you don't find it all in one place,” said Finance Commissioner Sawin Millet, whose office is working on a supplemental budget.
“We have a problem with the heating oil budget for this complex of state-owned buildings,” he said. “We know we have flood assistance money that is owed municipalities.”
Millett said the current budget issues can be addressed with one-time resources, like the $5.7 million going into the general fund from a settlement with several large national banks over improper mortgage deals. But second-year budget issues will need cuts throughout all state spending.
Millett said a reprojection of revenues was expected following the January revenue numbers that were $38.7 million below November estimates.
State Tax Assessor Jerome Gerard, the chairman of the forecasting panel, said a projected decrease in income tax revenue will likely be offset by projected increases in gambling revenues from casinos and from additional fine collections.
Concerns over the increased oil prices and its potential impact on state revenues were a theme throughout the committee meeting. Mike Allen, associate commissioner of finance, said when the revenue projections were last done, oil was trading at $89 a barrel, well below the $106 per barrel level when the panel met. He said a major spike in energy costs would likely affect several state revenue lines significantly, resulting in further losses.
Lawmakers often look to the sales tax as an indicator of the health of the economy because reflects consumer confidence. Sales taxes have been slightly below projections, but only by less than 1%. “The holiday season, for most stores, was not spectacular,” Allen said.
Checking out checkoffs
- Panel wants to end charitable giving on tax forms
- Political gifts eyed for immediate cut
The Legislature's Taxation Committee has proposed eliminating state income tax checkoffs that allow people to contribute to political parties or seven different charitable causes when filing their tax returns.
“Very few people, less than one half of one percent of taxpayers, use these checkoffs,” said Rep. Gary Knight, R-Livermore Falls, panel co-chair. “The state should not be collecting contributions for charities.”
The committee decided to report out legislation that would repeal the checkoffs starting at the end of the 2013 tax year, but only after considering proposals to add more of the checkoffs to the tax form.
Maine Revenue Services indicates that 2011 checkoffs raised $164,340 from 641,445 tax returns. The 14,042 contributions ranged from zero to the Reform Party to $33,332 in contributions to the Maine Endangered and Nongame Wildlife fund.
MRS estimates every new line added to the tax form costs about $16,000. Several panel members said several of the checkoffs cost the state more than they generate for the charity.
The committee was not unanimous. Rep. Seth Berry, D-Bowdoinham, argued contributions have decreased over the years because the location of the checkoff went from the front page to a separate schedule on the tax return.
“There was a dramatic drop off when that happened,” he said. “One [group] went from just over $117,000 to $45,000.”
Berry said deciding which charities can use the tax form to get contributions is difficult, but that's the Legislature's responsibility.
Rep. Paul Waterhouse, R-Bridgton, said he would support eliminating the political party contributions immediately. “I don't think you are going to see a lot of people back home come running up here to protect that checkoff for political parties,” he said.
In 2011, only 1,885 of Maine's 917,324 registered voters contributed a total of $18,358 to the four political parties.
Deficit debacle
- Delegation wants deficit reduction
- Politics prompts pessimism
Maine's congressional delegation wants Congress to act this year to reduce the federal budget deficit, but there is pessimism that it can occur in an increasingly partisan, election-year atmosphere.
“Whether something can happen this year remains to be seen,” said Republican Sen. Olympia Snowe in an interview. “But, when we are not going to even have a budget resolution, I don't know what the foundation would be to build a deficit-reduction package.”
She was sharply critical of Senate Democrats for saying they will not consider the passage of a budget resolution that sets a spending limit for the next budget year. She said the recent extension of the payroll tax cuts and unemployment benefits was not fully paid for and added to the deficit. Despite her skepticism that a significant reduction plan can be worked out this year, she said an attempt should be made.
Republican Sen. Susan Collins agrees that not having a budget resolution makes it very difficult to achieve significant deficit reduction. She also criticized President Obama's budget because it increases overall spending and adds to the more than $15 trillion deficit.
“It is very difficult to tackle serious deficit reduction without a budget resolution that puts a firm cap on the various categories of spending,” she said.
Democratic U.S. Rep. Chellie Pingree believes the threat of across-the-board cuts through the sequestration process will eventually move Congress to act. She said such cuts are a “meat axe approach” that simply will cut programs by a certain percentage with no assessment of whether the programs are doing their jobs.
Democratic U.S. Rep. Mike Michaud said the cuts that will kick in next fall as a result of the super committee's failure are unacceptable because they are not targeted.
“There will be some on the Republican side who will try to exempt defense,” he said. “There are areas in defense that we can target and should target for reductions. I think we should further look at overseas bases and reduce our footprint around the world.”
It's likely that if any debt reductions are made it will be done piecemeal as spending resolutions are considered later in the year. Collins said the closer to the fall election, the less likely significant action will be taken and that short-term spending measures will substitute for the usual spending bills.
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