Spare change | Mal Leary sees more budget changes ahead
State ends budget year with surplus
- Income taxes drive rise
- Extra funds already allocated
Revenues continued to come in better than expected in June, resulting in a revenue surplus of $49.2 million for the budget year ending June 30 and expected to increase by another $3 million to $5 million when unspent appropriations are tallied next month. But, the extra money is already obligated.
“It seems the Revenue Forecasting Committee was a little conservative,” Finance Commissioner Sawin Millett said. “To me, it is a very good turnaround in the last three months.” Budget law allocates the first $33.8 million, with $25 million going to the state budget reserve and other monies set aside in smaller contingency accounts.
Sen. Richard Rosen, R-Bucksport, co-chairman of the appropriations committee, said while he expected a surplus, he did not expect one in the $50 million range. Rosen said he is still concerned that employment growth has been sluggish but said nationally, many employers have returned part-time workers to full-time employment. One local barometer for him is the Verso paper mill in Bucksport, he said. “Two years ago there were a lot of rolling work stoppages,” he said. “That hasn’t happened in quite some time and now they are advertising and actually looking for more help.”
Rep. Emily Cain, D-Orono, the House minority leader and co-chair of the committee last year, said while the surplus is certainly good news, she is not sure the economy has really turned around. “We need to see people who are unemployed, and have been unemployed, getting a job and going to work,” she said. “We need to see more jobs being created, not just people working more hours.”
The personal and corporate income taxes continued to drive the good revenue news, with individual income taxes ending the budget year $22.6 million over estimates. The corporate income tax was $15.8 million above estimates for the year.
After the $33.8 million set aside in budget law for specific purposes, the remainder of the surplus is allocated by a percentage formula. Thirty-five percent will go to the state budget stabilization fund, often called the state’s rainy day fund. The working capital fund gets 20%, and 20% goes to help pay down the unfunded liability of the state retirement system. The unfunded liability in the retiree health fund gets 15% of the surplus and 10% goes to the fund for state capital repairs and improvements.
Millett said when the additional cash is added to existing reserves, the state stabilization fund will have about $60 million.
LePage to push for Medicaid changes
- Gov. seeks tighter eligibility
- Opponents fear many will lose coverage
Gov. Paul LePage says he will push for a significant change to Maine’s version of the Medicaid program, MaineCare, by reducing eligibility to 133% of the federal poverty level. Opponents say the change will force about 30,000 Mainers off the program.
“This is what the level is in 47 other states,” LePage said. “We should not be more generous than these other states, but we are and we have been and it needs to stop.” He said reducing the eligibility level for childless adults will not have the impact on seniors that opponents have charged, but an administration study found the impact will hit young Mainers. “The average age of people, childless adults in the state of Maine, the average age is 34, predominately male and working,” he said. “That’s my problem, that’s what we want to fix.”
LePage tried to make the change in the two-year state budget, but it was rejected by the appropriations committee. He said the new state health insurance law includes provisions to make health insurance more affordable, and he believes many people between the current 200% of poverty level and the proposed 133% can help pay for their own insurance coverage.
Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the committee, disagrees. She said the 133% level amounts to annual income of $14,484 for a single adult. For a family of four, it is $29,726. Families and individuals at those income levels simply can’t afford health insurance at current rates, she said. “The more health care we take away from people, the more those costs are shifted to people who have health insurance and more shifts to local communities and local hospitals,” she said.
Sen. Richard Rosen, R-Bucksport, co-chairman of the committee, said he agreed with the concept of individuals and families paying for part of their health care costs, but said it is premature. The federal health reform law takes effect in 2014 and will provide subsidies to help those between 133% and 200% of the poverty level to buy health insurance, he said.
Panel seeks tax law rewrite
- Property, income taxes eyed
- Members cite unbalanced tax mix
While most lawmakers will take the summer off, the Legislature’s taxation committee plans to start rewriting the state’s tax laws.
“What I want to do is to re-codify the tax code, make it simpler, make it fairer,” said Rep. Gary Knight, R-Livermore Falls, co-chairman of the panel. “I want to extract the politics out of this if I can; I want us to focus on the economics.” He said the panel is inviting economists, academics, certified public accountants and tax attorneys to help overhaul the state tax code. “We are still one of the highest-taxed states in the country,” Knight said, “and the mix is poor in that we have too much reliance on the property tax.”
Sen. David Trahan, R-Waldoboro, co-chairman of the committee, said the top tax concern his constituents raise is the property tax. “I think that the property tax, in particular, needs a real tough look,” he said. “I know that the income tax structure, we are not finished with that. Sales tax, there are some problems in that area.” Trahan said he wants to take a close look at all of the tax credits lawmakers have adopted over the years, which he said have turned the tax code into “Swiss cheese full of holes,” and repeal them and use that revenue to further lower other taxes.
“I admit I am somewhat skeptical,” said Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the panel. “But I am always interested in an open discussion and dialogue about how we can make our tax code more modern, more stable and more fair.” True tax reform will mean significantly changing the tax code so the state gets less from income taxes and property taxes and more from consumption taxes, he said.
One panel member has already proposed a major tax reform plan: economist Richard Woodbury, an unenrolled senator from Yarmouth. “I believe that our tax system needs to be fundamentally refocused,” Woodbury said. “In particular, I think our income taxes need to be reduced by a lot, a lot more than the 8.5% to 7.95% that was in the budget.”
Mal Leary runs Capitol News Service in Augusta. He can be reached at editorial@mainebiz.biz. Read more of Mal’s columns here.
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