King backs extension of meals tax

AUGUSTA – Legislative budget writers received a quick sketch from the King administration Friday of how the governor proposes to cover a revenue gap of about $50 million in his two-year tax-and-spending package.

A central element of Gov. Angus King’s still evolving plan is the replacement of King’s original proposal for raising Maine’s tax on meals and lodging from 7 percent to 7.5 percent.

King now has adopted the basics of an alternative put forth by the Legislature’s Taxation Committee that would extend the 7 percent sales tax on meals and lodging to food establishments that do not serve alcohol, effectively increasing the tax on meals in such places from 5 percent to 7 percent.

The estimated impact of the change would be to raise revenue by about $28.6 million for the biennium of fiscal 2002 and 2003 – some $14 million more than the governor’s original proposal, according to King aide Kay Rand.

As with the original proposal, some of the new revenue would be used down the road to boost the state tourism budget from $4.7 million to $7.2 million per year.

The new King package also envisions a $9 million transfer from the Fund for a Healthy Maine, which draws on money from the state’s share of the national tobacco settlement.

Administration officials said some numbers and other details still needed fine-tuning, particularly the restaurant tax item. In response to those cautions, lawmakers on the Appropriations Committee were reticent in their initial assessments.

The Democratic House chairman of the panel, Rep. Randall Berry of Livermore, did suggest things could be worse.

“Less painful than it could have been, I think,” Berry said.

The necessity of budgetary revisions by the governor was assured Monday, when the revenue forecasting panel on which budget writers must rely agreed to lower its estimates through fiscal 2003 by nearly $50 million.

The downward reprojection was small, given the $5 billion-plus size of King’s overall budget package. But to put forth his original plan, the governor had to find ways to bridge a gap in the range of $250 million between demands for spending and anticipated revenue.

So, budget analysts on all sides say now, every new gap presents difficulties for elected officials seeking to maintain or expand services while minimizing taxes.

Berry, a committee leader for Democrats who have been trying to shield the state’s share of tobacco money for their most favored public health programs, shrugged at the latest proposal for a $9 million transfer from the Fund for a Healthy Maine.

Administration officials have suggested the amount in question merely reflects untapped money from program startups.

“That amount doesn’t affect the programs,” Berry said.

At the same time, looking ahead to more debate over deeper reaches for tobacco money that King would use to offset Medicaid shortfalls, Berry added: “That’s not agreeing at this point to cut back any programming.”

Two House Republicans on the Appropriations panel, Reps. Tom Winsor of Norway and Richard Rosen of Bucksport, said they would need some time and more detail to properly judge the governor’s revisions.

“It seems to me there’s a lot of one-time revenue sources and I’m concerned if they’re being used to fund ongoing programs,” Winsor said.

Winsor also shook his head over broadening taxes.

“That’s going to be hard to sell to my caucus,” he said.