Governor looks to compromise on borrowing


Gov. John Baldacci is talking with legislative committee chairmen and leadership from both parties to see if there’s a way out of borrowing $447 million to fund the state budget.

He is apparently looking for a combination of cuts and new taxes or fees to fill the hole.

The Democratic co-chairmen of the Taxation Committee said Monday they had been asked by the administration to find money to offset the borrowing and were so far considering a reduction in the amount of tax rebates funded under the Business Equipment Tax Rebate (BETR) program.

“We’ve been asked to look for any money we can come up with to try and reduce the borrowing,” said Sen. Joe Perry, D-Penobscot.

Senate Minority Leader Paul Davis also confirmed he and other Republican leaders had met with Baldacci, who told them, “he would like to find an alternative to the borrowing,” Davis said.

Davis, for one, wants all the money to be found in budget cuts, not new taxes. When asked specifically if he could support a hike in the cigarette tax to make up some of the borrowing – an idea being floated in the Statehouse – he said, “I won’t vote for a cigarette tax. Perhaps my colleagues will.”

Baldacci doesn’t need to find the full $447 million in borrowing to keep the state’s two-year budget in balance. About $200 million was earmarked to pay down the state’s debt on its employee pension fund and to put some money away in a rainy-day account to serve as a hedge against unexpected shortfalls. About $250 million is for operating expenses.

On the revenue side:

A 50-cent increase on the cigarette tax would raise $38 million and raising it $1 would garner $73 million

Hiking the sales tax by 1 cent would raise $150 million

Reducing the BETR reimbursement to 90 percent of the personal property tax charged is worth about $8 million

The governor is under pressure on several fronts to reduce or eliminate the borrowing. A group of moderate Republican senators is leading a petition drive to overturn the borrowing through a people’s veto that would appear on the November ballot. If they collect the needed 50,000 signatures by the end of June, the borrowing in the state budget – due to go into effect on July 1 – would be put on hold.

Wall Street bond rating houses say they’re nervous about the state borrowing to pay its bills and the threat that borrowing could be derailed by a referendum vote. They are due to announce the state’s bond rating any day, and at least one rating house has warned it could lower the rating, meaning the state will pay more interest on its loans.

Sen. Peter Mills, R-Somerset, the leader of the petition drive along with Sen. Richard Rosen of Bucksport and Sen. Karl Turner of Cumberland, said Monday his group was now getting “1,000 signatures a day,” with the help of paid signature gatherers.

“It’s coming along fabulously,” said Mills, who said he would share some verifiable tallies by the first part of June.

What is still unclear is whether attempts to compromise on the borrowing package are political rhetoric or real negotiations.

Sen. John Martin, D-Aroostook, a veteran of political battles in Augusta, questions whether Republicans have the stomach for tax increases or Democrats for budget cuts.

Challenging his Republican counterparts on the Appropriations Committee, Martin said last week, “I want to know if there’s a willingness to compromise.”

If it’s a package of cuts and tax increases, Martin said, “we have to look at the package and all swallow hard.”

If Republicans say no to any tax increase, “I’m not willing to spend one more day talking to the Republican side of the aisle, if that’s not part of the package.”