Senate Republicans offer $100 million for schools if voter-approved tax surcharge is repealed

State budget negotiations appeared to begin in earnest Wednesday, with Senate Republicans offering to make $100 million in new funding available to schools if Democrats agree to repeal a voter-approved ballot measure to fund education through a tax on high-income earners.

Senate President Mike Thibodeau, R-Winterport, said his party’s offer satisfies the will of voters who passed the ballot referendum last fall that tacks a 3 percent surcharge on all household incomes over $200,000. Thibodeau said the $100 million annually would come from projected state revenues over the next two-year budget cycle.

Thibodeau’s proposal got a chilly reception from Democrats and House Republicans.

Democrats, who hold the majority in the House and have 17 of the 35 seats in the Senate, said Thibodeau’s offer would amount to cutting about $200 million from public schools, based on estimates that the new tax surcharge will pump up to $320 million into schools annually.

Sen. Cathy Breen, D-Falmouth, a lead negotiator for Democrats on the Legislature’s budget-writing Appropriations Committee, called Thibodeau’s offer “disingenuous” at best.

Democrats also said the way Senate Republicans want to send the money to local districts, in part counting it toward a state obligation to cover previously unfunded costs of teacher retirements, means the offer is even smaller and may actually still be more than $72 million short of what’s needed for the state to fund public schools at the 55 percent level that voters have demanded in two ballot referendums – first in 2004 and again last fall.

Thibodeau also is facing opposition from his own party.

House Minority Leader Ken Fredette, R-Newport, rejected the notion that any kind of deal between Republicans and Democrats is in the offing.

“There is no deal,” he said.

WARY OF SURCHARGE’S IMPACT

Senate Republicans, however, see the $100 million offer as one of the largest single increases for public schools in state history, Thibodeau said.

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“We’ve got $100 million of additional resources going to K-12 education,” he said. “We’ve said all along that we think it’s important to honor the spirit of what the voters passed, without doing harm to Maine’s economy that this unnecessary tax would create, so we have offered that.”

Republicans, including Gov. Paul LePage, have said the 3 percent surcharge will give Maine the second-highest top income-tax rate in the country, with individuals earning over $200,000 being taxed at 10.15 percent. The rate would outstrip all of Maine’s New England neighbors and put it behind only California, where the top tax rate doesn’t kick in until household incomes hit $1 million.

The surcharge, opponents have argued, could be the death knell for many small-business owners while exacerbating an ongoing problem that Maine has in attracting high-income professionals like doctors and engineers to the state.

“Our state has about $7.78 billion worth of resources coming into our state with current tax law, excluding the 3 percent surcharge on Maine’s small businesses,” Thibodeau said. The state’s current budget totals about $6.7 billion. LePage has proposed a two-year spending package to mixed reviews that totals about $6.8 billion. Even if $100 million was added to education spending above and beyond LePage’s proposal, the state would still be sitting on a revenue surplus if the forecasts bear out, Thibodeau said.

Sen. Troy Jackson, D-Allagash, the Senate minority leader, said he appreciated that Republicans came forward with a proposal, but their offer was essentially $200 million shy of what voters intended and likely would result in local property tax increases to fund schools.

“I feel very strongly again that the people told us how to fund education and to what extent, and we have said all along that we will talk about alternative ways to do the funding, but we are not moving off from what the amount is,” Jackson said. “Because that not only does the best for the people of this state education-wise, but it helps property taxpayers throughout the state.

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“I’m not as concerned about the high-income earners, but I am concerned about how people can afford to stay in their homes, and they are the ones who have been getting screwed, in my opinion.”

Fredette, the House minority leader, said his caucus is opposed to blindly adding more money to a state funding formula for public schools that is flawed and favors districts with property wealth and high incomes.

“The towns that have a very low propensity of free or (reduced-price) school lunches are getting most of the money,” Fredette said, citing Brunswick, Freeport and Cape Elizabeth. “The towns that have high incidence of free and (reduced-price) lunches, Lubec and Houlton or Piscataquis County towns, for example, are getting a disproportionate smaller amount of the money, so the formula is sort of flawed in this regard.”

Fredette also said House Republicans are not convinced that the state isn’t spending enough on public schools, but they are certain the money is not reaching the classrooms where it is most needed.

TIME SHORT TO FINISH BUDGET

Fredette said budget negotiations need to pick up the pace, given that lawmakers now have less than 30 days to get a state budget in place or risk a government shutdown under the state’s constitution, which calls for a balanced budget every two years.

“We are still waiting for some serious negotiations to start,” Fredette said. “We are still posturing like it’s March.”

To process a final budget bill, lawmakers need to give the legislative staff about a week to put the 600-page document together. The Legislature also needs to account for the 10 days the governor has alloted to him under the constitution to consider the bill before vetoing it, signing it or allowing it to become law without his signature. The budget bill would require two-thirds support in both the House and the Senate in order to become law as an emergency measure. Two-thirds support also would be needed to override a potential LePage veto of the budget bill.

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House Speaker Sara Gideon, D-Freeport, said the Republican proposal was a positive, if small, step forward.

“Democrats are absolutely ready to consider how to fund education fully with other revenue sources, but we do not see a way that 3 percent (surcharge) is repealed and that we actually pay for education fully with existing resources,” she said. “It’s just not possible without what we believe are probably very detrimental cuts to programs that all of us care about – we are open to see what the proposal is – but right now we are still hundreds of millions of dollars apart.”

Scott Thistle can be contacted at 791-6330 or at:

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