If all the Republicans had been in their seats when the House voted on the new state budget Friday night, the outcome could have been different. As it was, the budget ultimately passed 74-72, with four Republicans missing.
The Senate vote was a more decisive 19-14 in favor of passage, with two Republicans absent.
What matters today is the new budget, which replaces $250 million in borrowing with spending cuts and a $1-a-pack hike in the cigarette tax, has been enacted – meaning no more extra pay for legislators costing taxpayers $40,000 per day. And, the Democrats have derailed a Republican-led people’s veto drive that could have thrown the state’s finances into havoc.
Supporters of that referendum officially called off their petition drive on Monday and said they had won.
“The message has had its intended impact,” said Sen. Peter Mills, R-Somerset. He added “a note of thanks to our friends the Democrats for admitting they were wrong.”
Two other controversial items have been tabled to sometime later this summer. They are a package of general obligation bonds for everything from road improvements to land conservation and an all-encompassing tax reform bill that would broaden the sales tax to lower income and property taxes.
Tax bill coming
State Rep. Dick Woodbury, an independent from Yarmouth, is co-chairman of the Taxation Committee and co-author of the omnibus tax bill. It would redistribute the taxes Mainers pay, putting more reliance on the sales tax and less on income taxes, essentially exempting a family of four with income of $30,800 from paying any income tax at all.
At the same time, the bill expands the sales tax base to include more services and some goods. It also would increase the meals and lodging tax; tax soda for the first time; and raise taxes on beer and wine.
As part of the package, the state would meet its promise to fund 55 percent of K-12 education over the next two years – two years earlier than expected – and fully fund the $13,000 Homestead property tax exemption, half of which is now being picked up by cities and towns.
There was not enough support in the Legislature – even among Democrats – for the tax bill on Friday, and Woodbury said he was willing to get the borrowing and spending cuts out of the way first, and then work on tax reform.
“It would be a major rebalancing of this tax system,” he said, “and really would do what voters have expected of us,” in terms of shifting the tax burden off property and income taxes.
House Speaker John Richardson told members of his caucus he put the bill on hold because “I don’t want to see blood shed here or in the Senate,” unless the tax package has the votes to pass. If a special session or special day is devoted to just tax reform later this summer, “it is incumbent upon us to pass something,” he said.
The bond package requires a two-thirds vote of the Legislature, which means some Republicans have to support it. There was no bond package last session. Republicans have said all along they don’t want to approve more than $100 million in general revenue bonds this session, but are willing to support something.
Budget battle
The drama on the new state budget, which on average cut 2.5 percent out of most state departments, was largely played out in the House on Friday.
Two of the missing four Republicans were out on personal matters – one for a child’s college graduation and one for health reasons, according to Minority Leader Rep. David Bowles. Two others had previously scheduled events in their districts.
“These are some of the effects of having a citizen legislature, where people have other commitments,” Bowles said. “We were supposed to be out by June 15,” and if that had happened, he said, all his members would have been present.
Two Democrats – Rep. Barbara Merrill of Appleton and Rep. Barbara Twomey of Biddeford – voted with Republicans, and Rep. Thomas Saviello, D-Wilton, was there but did not vote. Rep. Charles Crosby, D-Topsham, voted against the budget the first time around, but came around to his party on final enactment. He was opposed to the 10 percent cut in the Business Equipment Tax Reimbursement program.
Merrill, who voted against the original budget because of the borrowing, voted against the second one because it did not, in her words, prevent “the shenanigans” with the borrowing from happening again.
She had authored legislation that would have required the state to establish a special reserve account equal to 5 percent of the revenue it collects. If the reserve account fell short, the state could not issue any bonds.
Plans criticized
While the Republicans may have been able to hold up the Democratic budget if they had all been present Friday night, they didn’t have the support to pass their own version of the budget Thursday. With the entire House present, the Republican budget went down 77 to 74, with Merrill again voting against her party. Independent Woodbury and Green Rep. John Eder of Portland voted with the Democrats.
The Republican budget would have eliminated $250 million in borrowing with spending cuts and a few gimmicks, including delaying the state payroll until after the start of the fiscal year in the second half of the biennium.
The biggest criticism of the Democratic budget is that it hopes to raise an additional $125 million in cigarette taxes by doubling the existing tax to $2 a pack.
Some like Rep. Twomey say the tax hits the poor hardest. Others say it’s unrealistic revenue because smokers will simply buy their cigarettes elsewhere, including over the Internet.
The reduction in the BETR program – which reimburses businesses for the personal property tax they pay on equipment – also had its critics, including some Democratic representatives with paper mills in their towns.
Sen. Richard Nass, R-York, spoke out against the BETR reduction on the Senate floor Friday night. He said with the $7 million cut in BETR for fiscal year 2007, businesses in Bath – mainly Bath Iron Works – would pay $500,000 more taxes; $140,000 more in Freeport; $200,000 more in Portland; $1.1 million in South Portland; and $70,000 in Westbrook, by way of example.
He called the tax change “detrimental and hurtful,” saying it could lead to a loss in jobs.
While the Senate defeated the Republican motion to protect BETR by 19-15, a similar House amendment was defeated by only one vote.
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