Earlier this month, Maine’s Republican Governor Paul LePage presented his $6.3 billion, two-year budget. Along with some sweeping changes to the tax structure, LePage has proposed eliminating local aid to towns and cities.
Christopher Cousins, statehouse reporter for the Bangor Daily News joined Morning Edition.
Let’s start with the most controversial thing Governor LePage is proposing there. He wants to eliminate $155 million in tax revenue shared with local communities. And I gather this isn’t the first time he’s tried something like this. Why does he want to do this?
Governor LePage is very fiscally conservative and he’s very interested in cutting taxes and spending at all levels of government. He calls municipal revenue sharing ‘municipal welfare’ here in Maine. He’s trying to cut municipal revenue sharing and his aim is the save the state some money and by extension force local municipalities to make cuts that he’s been calling for all along.
How are towns reacting?
Almost unanimously, they’re against this proposal. For a lot of our smaller towns and cities, it amounts to tens of thousands of dollars. But for larger towns and cities we’re talking hundreds of thousands or millions of dollars.
LePage has floated some major changes to the way Maine gets its tax revenue. He even wants to give towns a new source. What are some of the reforms he’s proposing?
On the municipal revenue sharing piece, he’s proposing to counter that blow to towns and cities by letting them tax their large nonprofit organizations such as hospitals, private schools and museums. This is something that’s been talked about in the past, but this has not gotten off the ground before and this year, before this has even been heard by the legislature, there are nonprofits all over the state lining up against it.
Has Governor LePage pointed to New Hampshire as a point of reference for his arguments?
That’s a huge point that the governor’s been trying to make since he’s been in office, that our income tax is too high to attract businesses to Maine. For smaller businesses at least, our income tax rate is the same as the corporate income tax rate. And he often points to New Hampshire which, of course, has no income tax or no sales tax, as a place where business is more likely to go when they do the calculations of their overhead.
Lowering the income tax rate is something everybody likes but creates holes in the budget that forces cuts that people aren’t willing to go along with. So it’s going to be quite a debate here.
In Maine, Democrats control the House and Republicans hold the Senate. Is there any indication yet how much backing LePage’s plans are going to get from his own party?
That’s been slowly rolling out. There were a lot of jaws on the floor when Governor LePage proposed this budget which is full of tax increases after four years of him saying he would not support tax increases. Democrats seem to be kind of lukewarm to the budget. This tax reform scheme is something that a lot of people and economist have known has to happen in Maine, for years. Republicans have not come out as you’d expect in full support of this. And I think their silence is really telling here.
Here in New Hampshire, recent lawsuit settlements resulted in the loss of some major sources of revenue. What are some of the challenges Maine faces heading into this budget process?
Times are tight here. Education in Maine is perennially a problem, or the funding for it. The state is by law supposed to be funding 55% but they don’t do that. Local K-12 schools have been flat funded for the three or four years and our university and community college system in the middle of some serious cuts that are gonna be rolling out over the next few years. But tying these budget challenges with the governor’s intention to reduce taxes and revenue—it’s just kinda creating a double whammy from a lot of people’s perspectives.