Taking from the poor
Democratic lawmakers show their Republican values
By: LANCE TAPLEY
5/7/2008 5:37:38 PM
Number crunching [SIDEBAR ... story below]
Baldacci’s proposed cut
Health & Human Services Department: $92.9 million
Education Department: $46.2 million
Higher education: $9.4 million
Rest of state government: $1.8 million
TOTAL CUTS: $150.3 MILLION
Health & Human Services Department: $64.3 million
Education Department: $46.3 million
Higher education: $4.4 million
Rest of state government: $3.1 million
TOTAL CUTS: $118.1 MILLION
Using state-employee health-insurance and retiree reserves: $46.8 million
Selling “unclaimed property” stocks and bonds: $9.0 million
Postponing for a year a corporate income-tax deduction: $5.4 million
Dipping into the tax that finances the low-income housing fund: $3.1 million
Reducing commissions given to merchants for lottery tickets: $1.6 million
Other gimmicks: $6.8 million
TOTAL GIMMICKS: $72.7 MILLION
SOME BIG CUTS AFFECTING POOR PEOPLE
Medicaid (for poor people’s medical bills): $10.1 million
Services for the mentally ill: $9.8 million
Child welfare services: $8.1 million
Disabled people’s services: $5.6 million
Elder services: $2.5 million
SOURCES: Office of Fiscal and Program Review, State Budget Bureau, other state departments
What values do Maine’s Democrats hold? In advance of their gathering in Augusta at the end of the month to celebrate themselves in their state political convention, let’s examine their values as expressed in the actions of Democratic lawmakers, who control both houses of the Legislature, and of our Democratic governor, John Baldacci, during the recently ended legislative session. Because the state budget is the chief work of any session, it is the best expression of political values under the State House dome — much better, say, than politicians’ rhetoric.
When faced this year with a $190-million, recession-induced shortfall between projected government expenses and tax revenues, Democratic politicians used rhetoric like, “We will not pull the safety net out from under our most vulnerable citizens” (Governor Baldacci) and “Everything should be on the table; there’s no exemption for the business community” from financial pain (Speaker of the House Glenn Cummings).
But their actions belied their rhetoric. As usual, there was an exemption for the business community — and for the wealthy. Baldacci and the Democratic Legislature balanced the budget by cutting deeply into services for the sick, poor, elderly, disabled, and mentally ill. They also slashed state aid to elementary and high schools and funding for the University of Maine and the community colleges.
Not only did the rich and the corporations not get asked to sacrifice to balance the budget (one option would have been to take away some of their roughly $1.5 billion in annual tax breaks), but overwhelming majorities of legislators voted to shovel millions more dollars to them — though at the end of the session the Appropriations Committee couldn’t find the cash to fund these giveaways.
In representative government, your values are shown by whom you value — whom you really represent.
Baldacci called it the most productive session he could remember. In a clip shown on Maine Public Broadcasting’s Maine Watch show, Speaker Cummings enthused about how legislators had increased funding for community colleges and the rest of higher education — though a few moments later, in the live part of the program, veteran reporter Mal Leary warned about political rhetoric and pointed out that Cummings was referring to a legislative move that had only “restored some of the money that had been cut from higher education.”
Leary gave the session a grade of Incomplete because of the big issues it didn’t address. It didn’t deal, for example, with discontent over property taxes, fuel-oil and gasoline prices, or last year’s school-administration consolidation. Cummings admits — sounding not so self-congratulatory in a Phoenix interview — that the budget decisions were “grim,” though he and other legislative Democrats pat themselves on the back for preventing what they call the worst of the cuts Baldacci had proposed. (Republicans generally don’t regret spending cuts, and they admire Baldacci’s approach to state finances.)
To see how Democratic values are expressed precisely — in dollar figures — let’s look at the session’s major budget actions and then at how they affect broadly defined classes of people. The numbers in the accompanying tables are of changes made to the $6-billion General Fund — which pays most state expenses, and where the $190-million “hole” appeared — for the two-year budget period that ends June 30, 2009. The Legislature’s Office of Fiscal and Program Review crunched most of these numbers for the Phoenix, with details from the state budget office and several state departments.
SPENDING CUTS AND GIMMICKS
For the most part, the Legislature filled the hole by shrinking last year’s appropriations for state programs. The "Spending Cuts" table has the breakdown. The final number on cuts was $118.1 million. But legislators also filled the budget hole with “gimmicks,” the name State House regulars have for shifting money around within the treasury and other creative accounting measures. Baldacci came up with the idea of using the state-employee reserves, and the Legislature substituted the other gimmicks for many cuts Baldacci wanted to make. See the "Fiscal 'Gimmicks'" table for the details; total gimmickry supplied $72.7 million.
Together, cuts and gimmicks totaled $190.8 million.
This year’s tax increases occurred not to remedy the shortfall, but to prop up the state’s ailing Dirigo Health Insurance program. A 1.8-percent tax on insurance-company-paid health-care claims, state analysts say, will bring in $33 million in just the first year. It replaces the yearly assessment on the companies for the money that Dirigo supposedly saved them, which they contested. A hike on soda, beer, and wine taxes will also be devoted to Dirigo; it theoretically will bring in $16.7 million in the first year. The last-minute introduction and passage of these taxes, with no public hearing, incensed some Republicans and business interests. They have begun a “people’s veto” referendum effort to block them.
TAX EXPENDITURES (TAX BREAKS)
The Legislature passed a big expansion of the historic preservation tax credit. This is actually a giveaway of up to $20 million per project; a developer refurbishing old buildings gets the money whether it owes income taxes or not. Several big developers, including Mattson, the company owned by Democratic wheels Kevin Mattson and Severin Beliveau, lobbied for it.
The legislation doesn’t have much effect on the current budget, but within a few years it could drain millions annually from the state bank account. Late in the session, legislators put a clause in the bill adding a financial incentive if developers include “affordable” units within their projects, but there’s no requirement they do so. (See “A ‘Good’ Tax Break in the Making,” by Lance Tapley, February 20, 2008.)
State government’s fuel and electricity costs are coming in at $10.2 million more than budgeted, so an appropriation covered that increase. Legislators approved borrowing $50 million for road repairs and $160 million for replacing and repairing bridges, the latter to be paid off by a $10 increase in vehicle-registration fees, which will bring in $16 million a year. Legislators rushed passage of this borrowing through the tail end of the session, without requiring the bills to undergo the usual two-thirds-of-each-house and public-referendum bond-approval process.
Who are affected most?
CUTS AFFECTING POOR PEOPLE
The Health and Human Services cuts total $64.3 million. Some of the most severe are in the "Some Big Cuts Affecting Poor People" chart, the numbers supplied by the department. Many other DHHS cuts are to jobs and administrative expenses in the department. The effect of many of the cuts will be tripled because the feds provide two-to-one matching dollars for a lot of programs that support low-income Mainers.
The poor pay a higher proportion of their income on food and drink than middle-class or rich people, so the Dirigo beverage-tax increase will hit them hardest.
CUTS MOSTLY AFFECTING THE MIDDLE CLASS
Let’s put here the number $53.8 million — everything that was slashed besides the DHHS programs. Education cutbacks affect people across social classes, of course, but the middle class is the most numerously affected. Education Department cuts include a $43.5-million reduction in state aid to the schools, the University of Maine System took a $3.1-million hit, the community colleges had nearly $1 million sliced away, and Maine Maritime Academy lost $323,000.
The middle class also is the group hurt in the largest numbers by the $3.1 million in cuts affecting the rest of state government. These include, for example, a $240,000 cut at the overworked Land Use Regulation Commission, a $222,000 reduction at the State Planning Office, and a $223,000 subtraction from state library activities.
And, of course, the middle class, which collectively pays most of the local property taxes, will watch those taxes rise because in many towns and cities citizens will not accept slashing school budgets to reflect diminished state aid.
CUTS MOSTLY AFFECTING THE RICH AND THE CORPORATIONS
Well, some of the rich may encounter nuisances such as fewer open hours at the state library — if that comes to pass. But their resources can compensate more easily than in the case of the less-favored classes.
One could argue that the Legislature’s gimmick of delaying a corporate income-tax deduction — for operating losses carried forward year-to-year — will hurt some corporations, but they will be able to take the deduction in future years.
They wanted to give more to the rich Although Democrats did reduce Baldacci’s proposed human-services spending cuts, they are still huge and will be felt sharply since they affect very vulnerable people at a time when the federal government also is reducing social-service spending and the country is going into a recession. Things have been getting worse for the worst-off for some time. Maine Equal Justice Partners, which lobbies for the poor, quotes the US Census Bureau that poverty among Maine children increased from 10.4 percent in 2001 to 16.7 percent in 2007 — the sharpest climb in New England.
And the latest cuts come after years of state human-services reductions during Baldacci’s tenure and the Democrats’ control of the Legislature. The National Alliance for the Mentally Ill–Maine calculates that state mental-health programs, including the loss of matching federal dollars, were cut by $33 million in just the 2007 fiscal year.
Yet the Legislature this session ardently expressed its desire to give away more money to the very rich and to businesses. The House, with Democrats in a 90-59 majority over the Republicans (with two Independents), voted 83 to 57 (with 11 absences) to reduce the state estate tax — the tax paid by estates after (literally, only) millionaires die — to conform to the Bush-administration-promoted lower federal estate tax. The Senate, controlled 18 to 17 by the Democrats, voted 31 to 3 for this quintessentially Republican “tax reform” (Republicans call it the “death tax”). Only Portland-area Democratic Senators Ethan Strimling, Joseph Brannigan, and Beth Edmonds, the Senate president, voted against it (Senator Lynn Bromley, a Democrat of South Portland, was absent).
State House analysts calculated this reduction would cost the treasury a total of $55 million in the next three years, so despite the enthusiasm for the bill expressed in both houses the Appropriations Committee killed it in the last days of the session. The Legislature probably would have had to increase another tax to pay for it.
“Everyone would like to get to the point where these things could be done,” says Democratic Senator Margaret Rotundo of Auburn, the Appropriations chairwoman, on the subject of reducing the estate tax. “It would be something that would be nice to do.”
She is concerned that because of the state estate tax Maine is losing “very large numbers” of philanthropically inclined rich people — though she had no statistics to back up the claim.
Senate Majority Leader Libby Mitchell agrees, “It’s a nice idea, but we can’t afford that.”
By contrast, Senator Strimling, who is running for Congress in the 1st District Democratic primary, spoke forcefully on the Senate floor against the estate-tax reduction: “We just passed a budget a week ago in which we cut $200 million from many of the neediest, the poorest, the disabled, and the working families of this state. It would be completely fiscally and morally irresponsible to now give a tax break to those with over a million dollars.”
Strimling, Brannigan, Edmonds, and another Democratic senator, Bruce Bryant of Dixfield, also lost initially when the Senate passed, 29 to 4 (with 2 absent), a bill extending the state’s exemption on new business equipment from local property taxes to retail stores with less than 20,000 square feet. The House passed it 139 to 0 (with 12 absent). Analysts determined, however, that the bill would cost the state $4.2 million in the next two-year cycle, and it, too, was eventually killed by the Appropriations Committee before final Senate passage.
Why did Democrats go for this bill when huge cuts were being made to social services?
“Why not?” answers Democratic Representative Janet Mills of Farmington. “It helps small business. It’s an incentive.”
Whom do Maine Democrats value? At their May 30-June 1 state convention, Democrats will shout their support for presidential candidates Barack Obama and Hillary Clinton. But the legislators there, who tend to be the cheerleaders, will be trumpeting a contradiction. The economic proposals of Senators Obama and Clinton — increasing taxes on the rich and reducing tax breaks for the corporations — make these candidates look like radicals compared to Augusta’s Democrats. As profoundly as Democrats in Washington bow to lobbyists representing corporate and personal wealth, state legislatures are famously more subservient, the Democratic majority in the Maine Legislature is no exception, and Baldacci has seldom found a big-business idea he doesn’t like.
“All over the country, businesses are really in control,” says Strimling. They are constantly demanding that legislators “sweeten the pot for them.”
Senate Majority Leader Mitchell says that when Democrats voted to reduce the estate tax they knew the Appropriations Committee would kill the bill. The vote was in part, she says, a strategy to deny Republicans an election-campaign attack point against Democrats.
But her comments reveal that she believes the correct stance for Democrats, the self-proclaimed party of the people, is to look like Republicans, whom Democrats say are the party of the rich and the corporations.
What values do Maine’s Democrats hold, at least at the State House? Republican values.
Lance Tapley can be reached at email@example.com .
Copyright © 2007 The Phoenix Media/Communications Group