Gov. Paul LePage is scheduled to present his State of the State address to the Legislature on Feb. 7. The governor’s address is an annual presentation to a joint convention of the Legislature, although last year LePage broke with tradition by sending a letter instead.
Past governors have used their State of the State message to advocate for policies and proposals under consideration by the Legislature. This year, LePage is pushing for passage of his two-year budget plan, which includes a dramatic reduction of the state income tax and partially pays for it with steep cuts in services like welfare, an increase in the lodging tax and expanding the sales tax to include currently exempt goods and services.
Last year the governor skipped the State of the State amid ongoing tensions with a Legislature that has repeatedly rebuffed his boldest and most controversial proposals. And this year he has vowed to take his message directly to the people and bypass what he describes as an “irrelevant” Legislature.
But the budget proposal is the governor’s last chance to cement his legacy. He has made incremental progress cutting the income tax, but those efforts could be undone by a referendum that imposes a surcharge on Maine’s highest earners.
The governor proposed increasing and broadening the sales tax two years ago, but ran into opposition from fellow Republicans, many of whom previously campaigned against, and helped repeal, a tax reform law passed by a Democratic controlled Legislature over six years ago.
LePage’s new sales tax broadening, described in his budget as “modernizing,” applies the 5.5 percent sales tax to services such as haircuts, recreational purchases such as golf and skiing and professional services, including landscaping and snow removal.
LePage also takes direct aim at Question 2, a ballot initiative that added a 3 percent tax on Mainers making $200,000 a year to increase funding for local education. The governor has frequently railed against the ballot initiative, saying it will discourage investment and drive out high earners.
LePage’s budget delays the implementation of Question 2 for one year while phasing in new reductions of the income tax. The governor’s plan reduces the state’s tax brackets from three to two over the next two years. During that time, the surcharge to pay for education funding would be paid for by Maine’s highest and lowest earners — a sharp departure from the referendum approved by voters, which put the burden on high earners.
By 2020, LePage envisions a flat tax of 5.75 percent, factoring in the 3 percent education funding surcharge approved by voters.
Other budget highlights include:
Increasing the lodging tax rate from 9 percent to 10 percent.
Allowing towns to tax large nonprofits with properties of $10 million or more.
Removing tax exempt status for land trust organizations.
Eliminating the state formula to fund local school administration and encouraging district consolidation with a $11 million fund to pay for it.
Creating a statewide teacher contract.
Repealing and replacing the state’s local education formula.
Increases funding to the University of Maine System to maintain current tuition prices.
Zero-interest student loans to students attending the University of Maine and the Maine Maritime Academy.
A $50 million bond for transportation projects to be approved by voters.
Eliminating the general assistance program that provides money to towns for low-income family assistance.
Eliminating the current state cap on public charter schools.
Cutting eligibility for MaineCare health coverage for parents who are able to work and who currently earn over 40 percent than the federal poverty level. According to federal guidelines, a person at 100 percent of the poverty level makes $11,880 a year.
Reducing the maximum time that Mainers who qualify for cash assistance through the Temporary Assistance for Needy Families program from five years to three years.
The governor’s budget will soon be subject to scrutiny by lawmakers and affected interest groups. Governors’ budgets are routinely altered by the Legislature before they are enacted.
