Reversing cuts to highways, pensioners and dairy farmers, new budget proposal heads to floor

From left to right, Sen. Rick Bennett (R-Oxford), Sen. Jill Duson (D-Cumberland), Sen. Peggy Rotundo (D-Androscoggin) and Rep. Melanie Sachs (D-Freeport) reconsider items in the supplemental budget on April 15. (Emma Davis/ Maine Morning Star)

The Democratic majority of the budget committee voted Monday to reverse previously proposed cuts to the highway fund, tax relief for pensioners and subsidies for dairy farmers, which received criticism from Republicans and Democratic Gov. Janet Mills. 

Those changes were not enough to sway Republicans to support the Democrats’ budget plan, which now heads to the full Legislature, where Democrats also hold the majority.   

The gains for the highway fund, pensioners and dairy farmers did not come at the cost of some other additions the committee had previously voted in, such as rent relief.   

“For all of these reconsiderations, of course, there is continued dialogue with lots of folks,” committee co-chair Rep. Melanie Sachs (D-Freeport), “and we’re putting forward in the majority report a balanced budget that reflects and respects the needs of people in Maine.”

Before  final committee approval, Sachs introduced a proposal to remove the emergency preamble, which allows the budget to pass with a simple majority rather than requiring the support of two-thirds of legislators. The move, which typically doesn’t happen in committee, was opposed by Republicans but  passed by the Democratic majority.

Republicans on the committee argued it was premature. “I feel like we’re planning for failure,” Rep. John Ducharme (R-Madison) said. “What the 13 of us think around this horseshoe is only a guide for what happens upstairs.” 

Department of Administrative and Financial Services Commissioner Kirsten Figueroa said taking this step now would allow her department and the Office of Fiscal Policy Review to start working on the items in the budget agreed to by both parties — such as bolstering childcare subsidies and expanding the Medicare Savings Program — right away.

Sachs added that her proposal is also a means to recognize the reality of the remaining time left this session, which is scheduled to adjourn Wednesday.

The reopening of the budget Monday came after Mills and House Speaker Rachel Talbot Ross (D-Portland) called on the Appropriations and Financial Affairs Committee to do so, citing widespread agreement among lawmakers on the need for reconsideration. 

“Despite earlier, good-faith efforts to develop a budget that could earn consensus support, we recognized that we needed to take another look and reconsider our approach,” Talbot Ross said. “Over the past week, we have done just that and today the committee voted out a budget that delivers for Mainers and deserves broad based support.”

With the emergency preamble removed, the budget is likely  to be voted through, leaving it in the governor’s hands. On Monday, Mills’ spokesperson said that she doesn’t plan to veto it, though still has concerns. 

“The Governor appreciates the work of the Appropriations and Financial Affairs Committee, and she welcomes many of their changes, like improving support for dairy farmers, restoring money to the highway fund, and reversing their rollback of pension benefits,” spokesperson Ben Goodman said. 

“The Governor does remain concerned about added spending beyond what she proposed in her change package – spending that, as much as she agrees with it from a policy perspective, may not be fiscally sustainable in the long term. Her administration will have to take a hard look at the budget at the start of the next legislative session to make sure that the State of Maine is able to meet its commitments, both in the short- and long-term.”

Potential ripple in Democratic majority plan

Mills could have another, potentially conflicting, proposal on her desk as well. 

On Friday night, the Senate passed a heavily amended version of an emergency storm relief bill she’d introduced — which now aims to address far more than storm damage. 

The amendment to LD 2225, proposed by Sen. Rick Bennett (R-Oxford), keeps Mills’ funding to rebuild infrastructure damaged during consecutive storms this winter but adds funding for a multitude of other initiatives being considered in separate bills this session, notably mental health initiatives and nursing homes, which are not included in the budget proposed by the majority of the Appropriations Committee. 

Bennett told Maine Morning Star that the amendment provides an alternative path outside of the budget that the Legislature could take to fund some of the state’s most critical issues. After Monday’s budget votes, he said that option still has legs. 

Because the amended LD 2225 includes some elements of the minority budget report, if both the majority budget and the amended storm bill make it to the governor’s desk, she’d be the ultimate decider of what becomes law. As of the budget meeting on Monday afternoon, LD 2225 is being held in the Senate after a 20-13 bipartisan vote. 

Highway fund

The budget plan no longer includes changes to the highway fund.

Last weekend, the Democratic majority of the Appropriations Committee voted to combine the currently separate highway fund and general fund budget processes. The Transportation Committee currently determines the former and the Appropriations Committee the latter, so the shift would have expanded the Appropriations Committee’s oversight. Subsequently, the committee voted to reverse ongoing highway revenue negotiated as part of the biennial budget passed in 2023. 

After significant opposition from Mills, Republicans and some Democrats, the committee struck both of these proposals from its budget plan on Monday.

Sachs introduced these changes a week ago during a work session that ran well past midnight, which Republicans opposed both in content and timing. On Monday, Ducharme asked Democrats why their stance flipped, arguing that the funding change negotiated in 2023 created a sustainable highway fund.

Rep. Dan Ankeles (D-Brunswick), who sits on the Transportation Committee, argued that last year’s change was a bandaid rather than a long-term fix. The highway fund still “bleeds money from its natural sources,” Ankeles said, pointing to the Blue Ribbon Commission finding that alternative fuel vehicles are eroding the funding provided by fuel taxes.

The changes negotiated last year redirected sales tax from vehicles and liquor distribution to the highway fund, the latter Sachs’s proposal would have reversed back into the general fund. Sachs’ proposal had also redirected $11 million from the highway fund to the general fund this year, after the funding change generated more revenue than accounted for.

James Myall, an analyst for the progressive organization Maine Center for Economic Policy, defended Sachs’ proposal. In a blog post, he argued the extra funding this year would help make other initiatives feasible and that there are other options for revenue boosts long-term, such as raising the gas tax.

If not in this budget, Ankeles thinks highway fund revenue streams need to be readdressed and recommended the Legislature’s rules committee convene in the off-session to discuss. 

“It’s very important to the Democrats on this committee to adopt a mechanism whereby we can cut to the heart of the sustainability issue,” Ankeles said. 

Pensioners

Tax relief for pensioners will continue as approved last year, after the budget committee also reversed its proposed cuts to the deduction.  

As part of a tax relief effort negotiated to garner some Republican support for the biennial budget last year, it included a provision to continuously raise pension deductions, initially from $30,000 to $35,000 in 2023 and, starting this year, even more to meet the maximum annual benefit under the Social Security Act. 

The Democratic majority of the Appropriations Committee voted 8-5 last week to instead tie future pension deductions to inflation. All of those members have since flipped and the committee unanimously voted to strike this change from the budget plan.  

Dairy farmers

The committee reinstated dairy farm subsidies at the rate originally agreed to by the Maine Dairy Industry Association this session, after it previously voted to cut the proposed rate increase by more than half. 

Every three years, a study is conducted for the Maine Milk Commission to update break-even costs for the Maine Dairy Stabilization Program, which provides subsidies based on farm size. The latest study published in 2023 showed substantial increases are needed to fill the gap between production costs and market rates.

Currently, for each 100 pounds of milk, the rates are $20 for the largest farms and $23.05 for the smallest. The study recommends increasing those amounts to $26.87 and $28.90, respectively, which would require about $35 million.  

Maine Dairy Industry Association representative Heath Miller said the association went into discussions with lawmakers expecting that full amount would not be possible and settled on increasing payouts instead by 25% of the gap between current rates and suggested pay-outs. 

This is the recommendation put forth in a bill from Rep. William Pluecker (I-Warren), which has passed both chambers, and that Mills included in her proposed budget changes. In contrast, the Democratic majority of the budget committee voted last week to increase payouts by 10%, with an additional one-time payment for certain farmers.

“Even giving us the whole 25%, there are going to be farms that are not profitable,” Miller said. 

Since 2020, Maine has lost one-third of its dairy farms, joining a national trend of closures. However studies have shown that the Maine Dairy Stabilization Program has reduced the number of closures by creating effective price floors that reduce producer uncertainty.

Separate from this program, Mills signed emergency legislation this session to establish a task force to study the challenges facing Maine’s dairy farms and propose ways to improve sustainability. 

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