Gov. Angus King set the right tone Monday for what will be lively second session of the Legislature. His budget proposal contains a good mix of tax breaks, ongoing support and some new funding from a state surplus that may be $250 million or, more likely, considerably more. Though a few budget lines, like his increase for General Purpose Aid to Education, are just starting points for further debate, the overall package is a thoughtful distribution of the state surplus.

The governor’s decision to spend $15 million of the tobacco settlement to help make up a Medicaid shortfall should be supported by the Legislature. Part of that shortfall occurred because the Department of Human Services screwed up — it simply didn’t recognize the increase of use and didn’t anticipate higher medical prices, particularly for pharmaceuticals. But part of the shortfall can be attributed to the nature of financing health care these days: It’s an uncertain business that has caught some of the best companies — witness Harvard Pilgrim — by surprise. The tobacco money was specifically earmarked for state health costs; a Medicaid shortfall qualifies abundantly.

For tax cuts, the governor properly cleaned up Maine’s income tax problems with a proposal to rid the code of a provision that maintained income-tax brackets when inflation remained below 3.5 percent. Inflation hasn’t hit that level in a decade, though incomes have crept up, pushing taxpayers into higher brackets without regard to the small but cumulative amount of inflation the state has experienced. Tying the personal exemption to the federal level will also give state taxpayers a needed break.

His proposal, already supported by legislators, to exempt $6,000 in state, federal and military pensions from state taxes is a matter of fairness. Social Security already is tax-exempt, and there is no reason to penalize retirees who dedicated their careers to public service.

For ongoing services, it was especially important that the governor identified a one-time $33 million appropriation for the Department of Transportation. No matter how many high-speed Internet connections the state may have, its economy will not flourish without good roads and rails. Included in the transportation package is $3.6 million to extend I-395 in Brewer to Route 9, $5.6 million to begin a 10-year project to improve the arterial roads for an east-west highway route and $1 million to help Bangor International Airport improve its marketing. Disappointing was a mere $500,000 to speed up the extension of the Calais rail line.

Downeast has been hit hard economically of late, and could get hit even harder if Atlantic salmon are listed as an endangered species. Part of the state’s response must be to create the opportunity for alternative sources of revenue to Washington County. Rail would help.

Which leads to the Rainy Day Fund, currently at 6 percent of annual revenues. Gov. King proposes to raise it to 8 percent with the addition of $32 million. Certainly, being prepared for the next economic downturn is in Maine’s interest, and while there are clear skies over much of the state, that’s not true everywhere. With dramatic reductions at Cutler Communications Station and its natural-resource-based industries imperiled, it is raining cats and dogs Downeast. Why isn’t it appropriate to take some of the large addition to the Rainy Day Fund and apply to the place where the weather is heaviest?

Some new funding proposals in the governor’s budget also deserve legislative support. The spec building program under the Department of Economic and Community Development, at $5 million, helps overcome a common hurdle in attracting businesses to Maine — the relative dearth of finished industrial space.

The governor’s $20 million school-renovation plan is an overdue change in emphasis over building new. And in higher education, the governor has matched with $2 million the generous gift of Maine native Bernard Osher, a California businessman. Mr. Osher’s donation was established to help the new community college program by providing scholarships to needy students. The gift was welcome and the match was a great one for the state.

Funding education

Majority Democrats are likely to view the governor’s proposed $12 million increase in K-12 education as a point to run over on their way to a significantly higher figure. Gov. King must feel that any number he proposes for General Purpose Aid to Education immediately will be upped in the Legislature.

During his five years in office, Gov. King has consistently underfunded GPA increases with dire warnings of fiscal doom if the number were further raised, consistently negotiated higher levels with the Legislature and seen higher and higher levels of performance from students and relieved property taxpayers without a bit of doom on the horizon. The governor’s proposal this time is considerably better than in the past, but it still does not get Maine to state majority funding levels in the foreseeable future. If economic times are as good as his administration claims, his GPA increase should reflect it.

A GPA budget that moves the state in two or three years to paying at least half of K-12 education not only is fair to students who made the mistake of not being born in communities with high property valuations, it will allow municipalities to reduce property taxes and attract development. If an administration’s policies can be found in its budget, Gov. King can set a course for improving education statewide and encouraging economic development through a significantly higher contribution to GPA. The money to do so is there.