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Gov. LePage signs budget with largest tax cut in Maine history

Budget includes Pension Reform, Spending Realignments, Down Payment on Welfare Reform

After a careful, businesslike approach and examining all the details, Governor Paul LePage signed on Monday the $6.1 billion biennial budget that reduces taxes for Mainers and businesses, reforms the state pension system and makes changes to welfare programs.

“In February legislators were given a plan which was very different from previous budgets with a focus on creating jobs, lowering taxes, reforming welfare and realigning spending to better reflect today’s realities,” said Governor LePage. “The budget I signed today reflects a step toward fiscal responsibility and a change in the way we must operate as a state.”

“I am encouraged by some of the work done and the thoughtful debates that were involved during this budgetary process,” LePage said. “The state will now move toward a more sustainable pension system that Maine can afford and current and future retirees will benefit from.”

The two-year budget includes tax reform that provides $150 million in tax relief, including new tax code changes that conform to federal guidelines and a reduction in Maine’s top income tax rate from 8.5 percent to 7.95 percent, which is expected eliminate tax payments for 70,000 low-income Mainers. This represents the largest tax cut in Maine history.

Welfare reform is also a part of the 2012-13 budget, which emphasizes Maine will no longer be considered a welfare destination state. A new five-year limit on welfare benefits aligns Maine with other states and conforms to federal law. The limit does allow for certain exemptions for hardship cases, including those involving the elderly and disabled.

Drug testing will also be implemented for welfare recipients convicted of drug crimes, and those who violate welfare rules will face stricter sanctions. A first offense will result in the loss of adult benefits, and a second offense may lead to termination of full family benefits.

In addition, DirigoHealth will be phased out with an end date of January 1, 2014, and legal noncitizens will no longer be eligible for MaineCare benefits as of July 1, 2011. However, Governor LePage has made it clear that more work needs to be done.

“We must continue make these types of changes to the system, not only to achieve significant savings, but to encourage Mainers to become self-sufficient,” he said. “This is a down payment on welfare reform and, after implementing these changes and gauging the results, I look forward to doing more.”

Many give credit to the Governor for maintaining a message that pushed for fiscal change—a message that hasn’t been seen in decades. Both leadership in the House and Senate lauded Governor LePage for endorsing the budget Monday.

“I am delighted that Governor Paul LePage today signed the biennial budget,” said House Speaker Robert Nutting. “This plan mirrors the reforms the Governor called for shortly after taking office. Among the highlights are $150 million in tax cuts, the largest in Maine history, and pension reform that will save taxpayers billions in the years to come. This budget also includes no cuts to education or programs that protect Maine’s most vulnerable. It’s also free of gimmicks like state shutdown days.”

“It is a validation of the outstanding work done by the Appropriations Committee and of the decision by Republican legislative leaders to pursue a bipartisan two-thirds budget,” said Senate President Kevin Raye. “By affording the minority party the respect of inclusion in the budget process we were able to work through our differences and secure a thoughtful budget that honors the core principles advanced by Governor LePage.”

Senate Majority Leader Jonathan Courtney echoed his colleagues’ sentiments. “In just 40 days the Governor gave us a document that included substantial reforms to taxes, pension and our welfare system, and this vision survived the legislative process,” Courtney said. “It helps us take a major step in moving Maine forward.”

Maine House Democratic leaders also expressed relief that Governor LePage signed the state’s two-year $6.1 billion budget after months of tough negotiations and compromise.

“We are glad to see that the governor put politics and ideology aside to sign a budget that took months of tough negotiations by all sides,” said Rep. Emily Cain (D-Orono). “Democrats strongly opposed the governor’s original budget, but we worked vigorously with Republicans to find a compromise we could support. We understand no compromise is perfect.”

Democratic and Republican lawmakers made significant changes to the governor’s original proposal, rejecting what they called “the most devastating cuts” to teachers, state employee retirees and the welfare safety net. The two-year budget also restores the governor’s unpopular plans to cut the Fund for a Healthy Maine and prescription drug coverage for the elderly.

“Five months ago, many said agreement on the budget was impossible,” said Rep. Terry Hayes, the assistant Democratic House leader. “We rejected the most extreme measures of the governor’s original proposal. Democrats fought to keep our state’s promises to public employees, to protect our elderly and most vulnerable, and to support our schools and communities.”

Last week, the budget passed with strong votes in the House by 123-19 and in the Senate by 29-5.

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