Budget proposals make for hard sell Liquor store plan, tax hike sticking points

AUGUSTA – Even as legislative budget writers prepared Monday for a vote on a $5 billion state spending package, rank-and-file lawmakers were drawing battle lines over priorities for tax increases and program cuts.

Republicans in the House and Senate met in the late afternoon to ferret out details on the two-year state budget that, as of Monday, included saving $5 million by shutting down Maine’s remaining 27 state liquor stores and providing a severance package for more than 70 employees.

While Democratic legislative leaders have remained supportive of the proposal, their rank-and-file members sympathetic to labor concerns remained skeptical Monday. Democratic House Speaker Michael V. Saxl of Portland attempted to persuade a few members of his caucus at a time that the budget compromise was fair.

“It’s going to be hard sell for me,” said Rep. Joe Clark, a three-term Democrat from Millinocket. “People in my area are concerned about the implications for distributing liquor stocks to agency stores. If they close these liquor stores [where stocks now are stored], where will they have to go to get their liquor stock? Portland?”

Another key sticking point in the budget is Gov. Angus S. King’s plan to raise the state’s meals and lodging tax for all restaurants and takeout food services from 5 percent to 7 percent to generate about $14 million over the budget cycle. That tax hike, along with a proposed 26-cent-per-pack cigarette tax increase, has Republican members of the Legislature fuming.

The governor’s plan to extend the payment schedule on state retirement debt has been rejected by budget writers who prefer to dip into the state’s $143 million Rainy Day Fund rather than extend $35.5 million in state obligations to the retirement system.

Members of the Appropriations Committee are expected to meet at 11 a.m. today to give their unanimous approval to the budget package, which includes a 5 percent increase for local educational reimbursement in the first half of the budget cycle and a 3 percent boost in the second half.

But bipartisan support in the committee does not imply smooth sailing in the House, where Democrats hold a lopsided majority, or in the Senate, where an independent senator could cast the deciding ballot between 17 Republican and 17 Democratic members in a party-line vote. Those numbers could become increasingly important if budget negotiations drag on after Saturday, the deadline for passing the budget by a simple majority.

After that date, the budget bill becomes an emergency measure requiring a two-thirds majority vote in both houses of the Legislature for approval – a prospect that could extend the legislative session well into June should bargaining positions harden along party lines.

On Monday, legislative leaders like Saxl were hopeful his majority Democrats could be convinced to accept some aspects of a tax-and-spending plan they don’t like in order to achieve the spending priorities they desire. The fact that 76 state employees would lose their jobs as the result of a budget agreement was an unintended consequence of the negotiations that Democratic leaders had hoped to avoid, he said.

“We felt that in order to close the budget, the Republicans had put us in a place where it was worse not to close the liquor stores,” Saxl said. “And it’s not so much the concept of liquor stores being private or not private; it’s the concept of an attack on state employees and the trend toward privatization of state services. We’ve found in the past that privatization doesn’t protect quality and doesn’t save money. I don’t support it or every issue in the budget, but I need to support the budget as a whole, and I support this budget compromise as a whole.”

The decision on the state liquor store closures took labor leaders by surprise. Ed Gorham, president of the Maine AFL-CIO, said he was “disappointed” by Saxl’s remarks and had hoped for more consideration from Democratic leaders who historically have relied on the support of organized labor.

“There’s no need for state government to be acting like International Paper Company,” Gorham said. “They’re going to be laying off people for no good reason.”

House Republican leader Joseph Bruno of Raymond said members of his caucus were not happy with the plans for raising new revenue in the budget including the cigarette tax hike and expansion of the 7 percent meals and lodging tax to restaurants that don’t serve alcohol. Those establishments now are required to impose a 5 percent sales tax.

“We’re not sure that there’s enough money in the budget with respect to cuts in programs,” he said.

Bruno also was concerned with the second phase of the budget process, known as the Part 2 or new spending segment of the budget. Historically, bills with price tags are dealt with in later negotiations – not the Part 1 budget, also known as the current services budget, which is expected to be reported out today. Budget writers estimate that $7.7 million will be available under the Part 2 budget for new spending.

“We’ve got $48 million in requests,” Bruno said. “So we’ve either got to make more cuts in Part 2 or raise more taxes. So that’s our dilemma, whether we do it now or later.”

Still other Republicans in the Senate are uncomfortable with the idea of limiting a withdrawal from the Rainy Day Fund to $35.5 million or abandoning the notion that the state’s $50 million school technology fund – better known as the governor’s laptop computer proposal – should not be up for consideration as a revenue source.

“Now’s the time to make some hard choices,” said Sen. Kevin Shorey, R-Calais. “If we don’t, we’ll be in a difficult situation in the next half of the current session and in the 121st Legislature. If we continue to increase spending as we have while funding that through tax increases, we’re just going to be chasing our tails.”