Two More NE States Close Books on Tough Budget Year

In mid-June, we reported that Connecticut and Vermont had completed budgets in record time. Now it’s Maine and New Hampshire’s turn in this very difficult budget year.

Maine State Budget

After a rocky start, Maine’s newly elected Republican Gov. Paul LePage got much of what he asked for, as the Republican-controlled Legislature approved a $6.1 billion two-year budget, which included the elimination of a $1.3 billion shortfall, tax cuts, pension reform and welfare reform.

The Maine House passed the budget by a margin of 123-19, while the Senate approved it 29-5. With support from Democratic legislators, both branches exceeded the two-thirds needed to enact the budget and to override any vetoes.

The Legislature’s Appropriations Committee struggled to craft a budget that addressed most of LePage’s requests, while rejecting the worst possible cuts in services to the poor. House Minority Leader Emily Cain (D-Orono) noted that no one is ever completely happy with a compromise budget, while Senate President Kevin Raye (R-Perry) praised legislators for the bipartisan process to forge the compromise.

Tax Cuts

The budget provides the largest tax cut in the state’s history including the following:

  • reduces the top marginal personal income tax rate from 8.5% to 7.95%
  • restructures the personal income tax rates, collapsing from four to three brackets, replacing current rates with 0%, 6.5% and 7.95%  and eliminates the payment of state income taxes for 70,000 low-income residents
  • increases the standard deduction and personal exemption to the federal amounts
  • eliminates the state’s alternative minimum tax
  • raises the estate tax exemption threshold from $1 million to $2 million
  • limits the value of the property tax circuit breaker to 80% of the total
  • gives tax breaks to fishermen and redemption center owners
  • provides tax credits for businesses when they invest in new equipment.

Pension Reform, State Employees

The budget reduces the $4.1 billion shortfall in the pension fund for state employees by $1.7 billion. This is accomplished by:

  • eliminating the COLA for retirees for next three years, and after that, a COLA would only apply to the first $20,000 of an employee’s pension
  • capping future increases at 3%

While the Legislature rejected LePage’s proposal to require state employees to contribute 2% more to their pensions, there was agreement on the following:

  • state employees’ wages will be frozen for two years
  • no longevity payments will be issued to those not currently receiving such payments
  • state employees must retire at full retirement age to be eligible for state-funded health insurance.

Welfare Reform

The Legislature rejected LePage’s plan to end MaineCare for 28,000 low-income families with children and a proposal to end MaineCare for childless adults. Also, the Legislature restored funding for dental care and other special services.

The governor and legislature agreed on the following:

  • legal non-citizens currently receiving benefits will continue getting food stamps and federal welfare
  • legal non-citizens receiving Medicaid will no longer be eligible if they have not lived in U.S. for five years
  • a five-year cap will be imposed on those who receive federal welfare, i.e., Temporary Assistance for Needy Families/TANF.

Education, Higher Education Funding

LePage promised early on he would not cut funding for K-12 or higher education. The budget provides an increase of $65 million in funding for K-12 and level funding for higher education.

Health Insurance Reform

Republican lawmakers with scant support from Democrats rushed through a health insurance reform bill that purports to open up the insurance market in Maine and increase competition to the benefit of Maine residents.  The bill moves health insurance out of the state government arena into the marketplace.

Beginning in 2014, Maine residents who don’t’ wish to purchase insurance from their employers can shop for insurance in the other New England states except for Vermont. Insurance companies can’t deny coverage based on preexisting conditions, but opponents of the plan say the insurance industry is insulated with the creation of a high-risk pool to cover Maine residents who use more health services.

K-12: Maine Adopts Common Core Standards

Maine became the 42nd state to adopt Common Core Standards. Commissioner of Education Stephen Bowen noted: “We need to give students and teachers clear expectations. As I’ve been traveling around the state, I have heard it over and over from teachers—they want us to adopt the Common Core. They are rigorous, and there is a sense there will be staying power to these standards so they can work with them for some time to come.”

Maine Approves Charter Schools

LePage spearheaded a drive to make Maine the 41st state to approve charter schools. The new law allows for no more than 10 charter schools to be established in 10 years. However, the law allows individual school boards to set up charter schools within their school districts, which would not be subject to the cap of 10 schools per year. Additional provisions of the law include the creation of a State Charter School Commission and setting a limit on the number of students who can attend them for the first three years.

Legislation Signed to Boost STEM Education

LePage signed into law, an initiative that will focus efforts on the teaching of science, technology, engineering and mathematics (STEM) in prekindergarten through postsecondary education. The law creates a STEM Council made up of teachers, representatives of state government, higher education and business. The council will address ways in which STEM can be integrated into the school curriculum. The new law will build on the efforts of the Maine Department of Education, which started a STEM team to work with businesses and other groups to advance STEM education.

Revised Education Funding Formula Passed

Legislation was signed into law, which revises the school funding formula and shifts more money to many of Maine’s rural school districts. Proponents say this will provide additional funds to rural school districts in northern and eastern Maine and make the education funding formula more equitable. Opponents claim the law will politicize how school districts receive education funding. Under the new law, the City of Portland, which is the largest school district in the state, and communities in Southern Maine will receive less funding. All school districts will receive less funding in 2012-13 when federal stimulus funds are gone.

Higher Education

Trustees approved a tuition increases at the University of Maine where rates will go up by 4.5%—the smallest increase in eight years, according to Chancellor Richard Pattenaude. In the Maine Community Colleges system, which faces a potential deficit of $2.3 million, tuition will rise by 2.4%.

New Hampshire State Budget

New Hampshire lawmakers passed a lean two-year budget of $10.2 billion, which became law without the signature of Democratic Gov. John Lynch. Lynch in his initial budget message to the Legislature, proposed an across-the-board cut of 5%, but the Republican-controlled House and Senate went further and cut state spending by 11%. Casualties included hospitals, the poor, public employees and higher education. Major cuts in the budget are as follows:


  • cuts $250 million over two years in state payments to hospitals, which hospital administrators say  will mean the loss of funds to treat Medicaid patients

Children and Families

  • cuts funding for Children in Need of Services/CHINS program by 50%  and changes eligibility requirements which would result in turning away more than 500 children
  • cuts $10 million from child care program that helps working parents or parents seeking employment
  • cuts New Hampshire Healthy Kids Program by $6.6 million
  • eliminates more than $7 million in funding for cash assistance for unemployed parents, state-supported volunteer programs for Alzheimer’s Disease Caregiver Program, State Tobacco Quit Line and the State Farmer’s Market Program.

Pensions, State Employees

New Hampshire’s state retirement system currently has an unfunded liability of $4.7 billion. A pension reform bill that made its way through the House and Senate was ultimately vetoed by Lynch. A revised pension reform plan wound up in the state budget and was approved by lawmakers. As of July 1, 2011, public employees will pay more for their state-funded pensions. Also, the new law requires cities, towns and counties to pay 100% of their contribution to the retirement system. Prior to the new law, the state contributed 35% to the system.

Unions representing public employees filed a lawsuit in opposition to the bill, and the New Hampshire Retirement System (NHRS)  is challenging whether the law supersedes the authority of the NHRS.

Mayors and municipal officials are seeking clarification of the new law. Many say they will pay the increased costs, but will have to find money within local budgets.

Public Employees

  • Public employees will be required to pay an additional 2%  toward their pensions
  • More than 1,000 jobs will be eliminated
  • State agencies will be asked to cut $50 million across the board in salaries.

Education K-12

Legislation was filed to give lawmakers the authority to approve Common Core Standards, but failed to get approval. Nonetheless, the New Hampshire Board of Education adopted the Common Core Standards on July 8, after holding several public hearings. According to the Department of Education, school districts will receive support from the department in aligning current state standards with Common Core Standards, and in the transition from the New England Common Assessment Program (NECAP) to a new assessment based on the Common Core. This process will happen over the next five years.

Education Funding

Lawmakers weren’t able to reach final agreement on a proposal that would give them a role in targeting state education funding to revenue-poor communities.

Lawmakers put off increases in funding for school districts by passing a new education funding formula that spends the same annual amount in the next two years. After that, the law will limit any increases to no more than 5.5%.

Higher Education

In addition to the severe cut that hospitals sustained, an equally devastating cut was made to University System of New Hampshire. Lawmakers reduced state appropriations by $45 million or 48% for the University System. New Hampshire’s Community Colleges were cut by $20 million.  Total cuts to the public higher education system over two years will amount to $110 million in state appropriations.

New Hampshire currently ranks 50th nationally in state funding for public higher education.

“We now have in New Hampshire the dubious distinction of having experienced the largest single cut to a public higher education system in the history of America, period,” said University of New Hampshire President Mark Huddleston.

As a result of the cuts in funding, university officials will eliminate more than 200 positions, reduce employee benefits, put off facility repairs, cut costs on all campuses and raise tuition 8.7% for state residents attending UNH.

One freshman lawmaker cautioned that higher education could be in for more cuts. Rep. Dan McGuire, who sits on the House Finance Committee, said a bill has been filed to break apart the University System of New Hampshire and let each institution that is now part of the system, stand on its own. McGuire claimed: “That’s an area where we can maybe save money, cut bureaucracy and improve the universities along the way.”

Carolyn Morwick is a consultant at NEBHE and former director of the Caucus of New England State Legislatures.



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