Gov. Paul LePage said Thursday that he is struggling to pull together a two-year budget proposal for the Legislature in January, as state revenues appear to be on a decline and state agencies and departments request spending increases.
LePage said on a WGAN radio talk show that he is preparing spending cuts for state government, not increases.
“This is a bear of a budget, the whole premise of this budget is do no harm to the economy,” LePage said. “We are doing final spending cuts today and we are also meeting today to see what the tax structure is going to look like.”
In July, a memo from a top LePage adviser to state department heads that was leaked to the media suggested LePage would seek to eliminate as much as 20 percent of the state government’s workforce – as many as 2,300 jobs. LePage later said his intent was to eliminate vacant positions that were still being accounted for in the state’s budget.
This budget proposal will be LePage’s last, because he cannot seek a third term. The Legislature has enacted only one of his three previous budget proposals and has passed two others into law over his vetoes. LePage has been successful in pushing the state’s income tax lower and eliminating it for about 70,000 of the state’s lowest wage earners.
But lawmakers have been reluctant to cut the income tax further, and they offset the revenue loss from LePage’s income tax cuts by broadening the sales tax and increasing it from 5 to 5.5 percent in 2013. The increase was supposed to be temporary, but lawmakers made it permanent in 2015.
On the radio Thursday, LePage made no mention of the state workforce but said he doesn’t even have the cash to hire a replacement for the top attorney on his staff, who announced this week that he had left the administration to start a private practice.
“At the present time, I have no capital, I don’t know how we replace because there is just no money,” LePage said. “We are just going to have to stay out of legal trouble.”
LePage said revenues coming into the state have decreased over the last two months. “What people don’t understand is that in the months of November and December the revenues went to a complete screech, I mean way under budget for the first time in a couple of years,” he said.
However, a Dec. 19 memo to the Governor’s Office from the Department of Administrative and Financial Services shows that state revenues for the first five months of the current fiscal year –July 1 through Nov. 30 – were up by more than $49 million. The report did indicate that revenue for November was down by 1.1 percent, $2.9 million.
It’s not clear how LePage can say the December revenues are down because those figures are not in yet. National consumer spending forecasts indicate that state sales tax revenues should climb in December.
The state’s Revenue Forecasting Committee is also predicting a $1.5 million revenue decrease in fiscal year 2018, but that is only a small fraction of the more than $3 billion in revenue the state is projected to collect.
LePage didn’t specify how much revenue is off for December, and said he doesn’t know if the decrease is a reaction to the presidential election or to ballot questions that passed in November to increase the minimum wage and add a 3 percent surcharge on the state income tax for households earning over $200,000 a year.
LePage criticized the committee for not producing a forecast that estimated the impact of those two ballot questions, saying, “they kicked the can down the road.” However, when the panel produced its most recent forecast in November, neither of the ballot questions had become law, and the committee is required to project revenues based only on current law.
LePage also threw a jab at the University of Maine System’s budget request, saying the system is asking for a 15 percent increase, while the state’s Office of Information Technology is asking for a $50 million increase.
“I told everybody that I was going to propose a flat-funded budget from 2016 to 2017 and it was like talking to a wall,” the governor said. “I’m going through the numbers now and there is growth everywhere. The demands are just absolutely unreasonable. I don’t intend to increase the income tax.”
LePage said he is “very, very, concerned” about what the next budget is going to look like. “I have no idea at this point, and it’s due the 6th of January,” he said.
The University of Maine System trustees unanimously approved the higher state funding request in September, noting that annual state funding for the seven-campus system has been at about $200 million or below since 2006, just before the recession. Despite the flat funding, the system has had a tuition freeze for the last five years.
The new funding requests before the governor cover three years: 2017 and the 2018-19 two-year budget. If approved, the total state appropriation to the system will increase from $200.6 million in 2016 to $225.1 million in 2019.
“Like everyone, we’re waiting,” system spokesman Dan Demeritt said Thursday. “We understand the governor has some tough decisions to make and we’re awaiting his budget submission next week.”
The governor also confirmed Thursday that his administration plans to locate a new 21-bed, secure psychiatric facility on state land in Bangor next to the state’s Dorothea Dix Psychiatric Center. A dispute with the Legislature over the location of the facility at the Riverview Psychiatric Center in Augusta caused a delay in its construction.
The new facility is needed to separate the mentally ill in state custody who have been found not criminally responsible but no longer need hospital-level care from other patients who are being held under civil court orders. Riverview, which receives about $20 million in federal Medicaid funds each year, came under the scrutiny of the federal government in 2013 when a federal audit revealed problems at the 92-bed facility. The issues included the use of stun guns, pepper spray and handcuffs on patients, improper record-keeping, medication errors and failure to report progress made by patients.
The federal agency, the Centers for Medicare and Medicaid Services, also determined that Riverview was improperly co-mingling patients who needed intense hospital treatment with those who no longer required hospitalization. As a result, the facility lost its federal certification, and Maine may have to repay millions in federal funds.
LePage claimed Thursday that Maine is being held to a different standard than other states by the federal government and suggested it is because the state has rejected Medicaid expansion under the Affordable Care Act.
“We are the only state that they are doing that with,” LePage said. “It might be it’s a new direction they want to go in, it might be retaliatory from CMS for not expanding Medicaid.”
He also said U.S. Health and Human Services Secretary Sylvia Burwell has refused to meet with Maine officials about the issue. “I don’t know what’s going on,” LePage said. “But I think after Jan. 20 things will change.”
LePage was referring to the inauguration date for Republican President-elect Donald Trump. The governor said he will attend that event in Washington, D.C.
Staff Writer Noel Gallagher contributed to this report.
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