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Legislature Debates Putting $73 Million into Rainy Day Fund

Gov. Paul LePage is pushing a proposal to set aside nearly $73 million in surplus revenues into the state’s Budget Stabilization Fund, also known as the rainy day fund. Opponents of the plan turned out at the State House Monday, arguing that Maine needs to pay its bills before padding its savings account.

Maine’s rainy day fund is already $111 million in the black, but LePage wants the Legislature transfer another $73 million in unanticipated tax revenue into the account.

Richard Rosen, the governor’s chief of finance, says there will never be a better time.

“The moment is now — it has been 18 years in terms of my recollection of being involved in this process that we had a revenue forecast that provided an opportunity,” Rosen says.

Rosen told members of the Legislature’s Appropriations Committee that the fund is now at just over 3 percent of General Fund revenue, and should be at 10-15 percent, according to the Federal Reserve Bank of Boston. Other financial analysts, says Rosen, have placed the figure closer to 20 percent.

LePage’s plan would bring the fund up to more than 5 percent, but Rosen also acknowledged that the Legislature would have to show discipline in the face of pressure to use the windfall to fund various programs and projects.

“I anticipate from the attendance in the room that there will be a fair number of people today that will be advocating that the newly recognized revenue should be spent and that the revenue should be chased for purposes of spending,” Rosen says.

“We don’t know yet what we’ll be hearing from people but I would imagine there will be people here who would characterize this as the state needing to pay its bills,” says Rep. Peggy Rotundo, committee House chair.

Rotundo, a Lewiston Democrat, says Maine has needs that are currently going unmet. She says the administration cannot expect to handcuff the Legislature in its efforts to help local school systems in communities facing major property tax increases.

Rep. Gay Grant, a Gardiner Democrat, says people in those communities will wonder why lawmakers would withhold funding that could be used to support schools and hold down property taxes.

“How would you answer that question to those folks who are now building their budgets at the school and local municipality level, and we’re going to take everything that’s just come in and do nothing to assist them,” Grant says.

Rosen says school funding priorities have already been set in the current budget and that it would not be prudent to use this one-time windfall from tax revenues to go toward school funding.

Rosen’s concerns were echoed by Republican committee members such as Sen. Roger Katz of Augusta, who says that spending the money on ongoing expenses could actually create problems for the next Legislature.

“If we were to spend it all on additional spending that are not one-time projects, wouldn’t we in effect be creating a structural gap for the next Legislature?” Katz says.

But such problems are less compelling for many of the people who spoke in opposition to LePage’s rainy day fund proposal. Among them, Wilbur Worcester of Bangor who says his mother was forced to die in a nursing home because Maine doesn’t provide enough home health care services.

“It always made me feel powerless to be able to help her more, but today each of you can help thousands of seniors like her,” Worcester says. “Please don’t let that opportunity pass by.”

Among other interests that turned out in opposition was the Maine Sheriff’s Association, which says the state’s county jails are still struggling to deal with the financial challenges of serving prisoners with mental illness and drug problems.