Last week, the governor proposed a supplemental budget. The supplemental budget covers fiscal years 2012-2013 and is comprised of all the technical and emergency shortfalls. However, instead of focusing on sound policy, the governor chose to include several controversial policies in the supplemental budget. The public hearings took place last week and the biggest crowds were for the Health and Human Services Committee, the Education Committee and the Taxation Committee. Below are some highlights of cuts or new spending from each committee.

Taxation Proposals:

The Appropriations Committee, along with members of the Taxation Committee, met with officials from Maine Revenue Services to discuss the new tax exemptions brought forward in the supplemental II proposal.

The sales and use tax proposals include a wood harvesting and horticultural exemption with a reduction of $350,000 in revenue in fiscal year 2013, rising to nearly $1 million per year in subsequent years. The committees had several questions regarding the logic of implementing further tax exemptions when faced with a current budget shortfall.  Several had many questions regarding the vagueness of the proposed language, especially around the wood harvesting provisions.  Rep. Martin pointed out that a similar proposal came forward last session which paired this exemption with job creation which was vetoed by the Governor.

The department also outlined a proposed medical equipment exemption for positive airway pressure machines (also called CPAP).  The committee asked questions regarding who is paying for these machines particularly if the bulk of buyers are Maine residents, insurance companies or other third parties.

In regard to income tax changes the department outlined an income tax exemption for active duty military pay for residents stationed outside of Maine starting in 2014.  The second proposal seeks to increase the current private pension exemption from $6,000 to $35,000 in the next five years starting in the next biennium.  During the discussion the department estimated that by FY 19 this proposal will result in the loss of $105 million in revenue per year.  The committee again questioned why proposals with no impact on the current biennial budget are being brought forward in an emergency supplemental during the last month of session.

DHHS Proposals:

The committee was joined by members of the Health and Human Services committee and received a briefing from Commissioner Mayhew regarding various DHHS proposals in this budget.  The two major items the committee focused on were the proposals around General Assistance and funding changes to the state’s two psychiatric facilities.

The budget proposes a series of changes to General Assistance.  The three major changes put forth are:

  • making those who receive TANF benefits ineligible for General Assistance;
  • restricting housing assistance through General Assistance to no more than 90 days per calendar year and
  • reducing the reimbursement rate for all allowable expenditures to 50% for all municipalities.

Currently, communities are eligible for up to 90% reimbursement if they have extremely high General Assistance use in a year. Portland is the largest community receiving General Assistance and gets close to $4 million each year from the State. The City additionally contributes $2.6 million per year. The HHS Committee pointed out that these General Assistance needs will not go away, and that the reduction in reimbursement to towns will simply be a tax shift to local communities.

The Commissioner then outlined a proposed change to the funding model for the state’s psychiatric facilities.   The department believes that due to a proposed rule change (and possibly past rules) that the state’s funding method using federal funds must be changed.  The result of that change would require an additional $10 million in General Fund dollars to replace the loss of federal dollars through the funding change.  The committee questioned why the department is moving so fast in reaction to a proposed rule change?  Such fast action has not been the normal procedure of the department especially for a rule that has not yet been adopted.  The committee requested further information regarding this rule change including any documentation about the rule change and the timeline for its proposed implementation.

Department of Education Proposals:
Commissioner Bowen outlined his new spending and cuts for the supplemental budget. The new spending initiatives include $5 million for the Fund for Efficient Delivery of Educational Services, $850,000 for refurbishing school buses, $185,000 for the state charter commission and $450,000 for Jobs for Maine Graduates.

The cuts include: $1.7 million to the Maine Public Broadcasting Network, 1% across the board cuts to Maine’s Public Higher Educational Schools ($1.7 million to the UMaine System, $554,000 to the Community College System, and $86,000 to Maine Maritime Academy). 

Finally, the Governor has a ton of big policy in the education portion of the supplemental budget — dramatically changing Child Development Services by eliminating the regional boards and all local control at the nine CDS sites and strengthening the ability for public schools to bring in kids 3-5 years old from the CDS sites. Also, the Governor re-institutes the Fund for Efficient Delivery of Educational Services. This new fund will be a mini race-to-the-top competitive grant that funds experiments around regionalization, professional development, choice options and more. The fund will accept request for proposals and be judged by three staff from the DOE who will score and then distribute the funds to schools.