Economic Events Dominated Legislative Session

Four months ago, when the Legislature convened for its second session, a sense of uneasiness and anxiety pervaded the State House. Representatives and senators knew going in that Maine’s economy had sagged worse than expected back in June 2009, when the two-year budget was adopted. Only six months into the new budget cycle, tax revenues were projected to come in far below expectations.

As legislators slogged back to the Capitol on those dark, frigid January mornings, we knew that a budget that had already been slashed by $500 million when it was created would require another enormous hit – this one for $438 million. The atmosphere of high spirits and good cheer that usually marks the start of a new session was much more subdued than I had seen before. Everyone understood that the work ahead would bring pain and hardship to schools and teachers, MaineCare recipients and providers, and the many other activities and services that depend on state funding.

It was no consolation that virtually every state in the nation was in financial distress as unemployment climbed, businesses collapsed and foreclosures multiplied. From coast to coast, state tax revenues were in a nosedive.

On Monday, April 12, the session was finally adjourned and legislators quickly scattered to their homes and regular jobs around the state. Now that the political dust has settled, we can look back at the events that shaped – and were shaped by – the second session of the 124th Legislature. Here are a few highlights of issues with widespread implications:

THE BUDGET: Last June, the Legislature passed a $5.8 billion biennial budget, which came in at $500 million less than the previous one. Indeed, the 2010-2011 budget was the first in nearly 40 years to be smaller than its predecessor. That steep reduction brought wrenching change to numerous sectors, including all state departments and agencies, MaineCare service providers, municipal revenue sharing, and education ranging from the state university system to K-12 schools. While the budget raised some fees, it did not raise taxes.

As mentioned above, even that reduction wasn’t enough to keep the budget in balance. A supplemental budget would have to cut another $438 million, according to revenue forecasters. However, in a bit of good luck, state revenues began to stabilize over the winter and Maine received additional federal money for MaineCare. That trimmed the required budget cuts to $310 million.

Legislators used the $128 million in “savings” to restore some funding to programs already on the chopping block. Restorations included $70 million to programs serving the needs of seniors, people with disabilities and families living in poverty. Other restorations added $26 million to K-12 education; $11 million in aid to towns and cities; $8 million to higher education; and $5.6 million in property tax relief in the Circuit Breaker program.

On Tuesday, March 30, in a remarkable display of bipartisan cooperation, both houses of the Legislature enacted the new budget by wide margins, with little debate.

EDUCATION REFORM: In March, Governor Baldacci submitted three bills to reform education and enable the state to compete for $75 million in the federal Race to the Top competition. That program, an Obama Administration initiative, will award $4.3 billion in grants to states that adopt meaningful change to improve educational outcomes. One of the bills would have based teacher evaluations partly on student achievement. Another bill came out of committee with an amendment that would allow charter schools in Maine.

Unfortunately, on April 7, majority party legislators attached a “poison pill” amendment to one of the most important bills. While the bill still passed, it was so watered down that there will actually be negative repercussions – a serious assault on local control of schools. The majority party also killed the bid for charter schools. Maine now stands to lose the $75 million in Race to the Top money as well as $160 million in other federal funds tied to educational reforms. All told, that’s a potential $235 million loss to the state. Maine taxpayers will take the hit.

BONDS: Last June, the Legislature approved a $150 million bond package for this biennium to be voted on in three separate elections. The bonds were targeted heavily to highway and bridge work, higher education and economic development. For example, there is an $8 million bond (with $32 million in matching funds) for redevelopment projects at Brunswick Naval Air Station.

Legislators agreed there would be no more bonding for two years, but in March the majority party asked for another $99 million and the governor proposed $79 million in bonds. Republicans objected and reminded the majority party that Maine’s total debt burden is now $11.5 billion. That forced a stalemate that was resolved on the last day of the session.

In a compromise, a $57.8 million bond was approved on April 12. It includes $24.8 million for highways; $16 million for railroads; $7 million for a deep water pier in Portland; $5 million for ocean wind energy; and $5 million for improved dental services and the establishment of a dental school. The bond package now goes to the voters, who must approve it by a simple majority.

A new governor and a new Legislature will be elected in November. Let’s hope when they report for duty in Augusta that the economy has rallied back to better times – for everyone’s sake.

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