AUGUSTA, Maine — Legislative Democrats endorsed a state spending plan on Saturday that raids transportation funding and scales back a pension tax break passed last year, angering Republicans and risking a showdown with Gov. Janet Mills.
Neither subject had been discussed much in public ahead of votes in the budget committee that came after 1 a.m. on Saturday, showing Democrats trying to sweep tens of millions of dollars into the state budget likely to fund a range of bills that have not been passed yet.
The abrupt move surprised observers, including Transportation Commissioner Bruce Van Note, who told lawmakers that he had not seen the new plans for his agency. The budget plan would take roughly $60 million per year from the transportation budget and move it into the separate state budget funding most of the government.
The Democratic governor’s office did not comment on the changes, but Mills has veto power over the budget, and Republicans are sure to oppose it. She hailed compromises last year that secured more transportation funding and raised a pension tax deduction of $35,000 this year to roughly $45,000 next year. Both are partially undone in this budget plan.
“It is radical, and it was just done with no public input,” Maria Fuentes, the executive director of the Maine Better Transportation Association, an industry group that represents contractors and other businesses focused on infrastructure, said of the changes in that policy area.
This version of the budget, led by Rep. Melanie Sachs, D-Freeport, passed the Appropriations Committee in a 7-5 vote along party lines on Saturday. Republicans protested and asked for more time to evaluate the changes, but they were rebuffed by Sachs and Democrats.
Buoyed by strong revenue projections, Mills put forward a $96 million budget addition this year that included changes to the state’s “yellow flag” and mental health laws after the October mass shooting in Lewiston and tens of millions of dollars for housing. It set roughly $100 million aside out of fiscal caution, which rankled progressives who pointed to a full rainy day fund.
The committee largely endorsed that package on Saturday, but it swept far more money into the state budget. Democrats did not say what they are going to do with that added money, but they look to be ramping up to fund a range of bills that have not gotten through the Legislature yet.
The transportation changes are the biggest policy shift. Last year’s reforms put $200 million more into the transportation budget by diverting 40 percent of sales taxes on vehicle purchases and 40 percent of sales and use taxes collected by the state to the transportation side. It was intended to shore up a system that had long relied on borrowing.
Under the new plan, Democrats would take $60 million of that funding back annually and take another $11 million this year in surplus transportation funding. Sachs also led a change that would make the Appropriations Committee responsible for the transportation budget that is now handled by a different panel devoted to that subject area.
After legislative Republicans asked Van Note, Mills’ transportation chief, to address the changes, he said he had not seen them. After reviewing them, he told lawmakers that the ongoing funding shifts would be likely to reduce the number of infrastructure projects and put an emphasis back on borrowing money to fill gaps.
“We’ll be back in the bonding soup or whatever else the conversation leads to,” he said.
Sachs defended the changes, saying they do not jeopardize the department and that taking over highway funding will allow her committee to move money between the two budgets and ultimately fix long-standing problems with the transportation system.
Republicans said the changes undid a bipartisan deal and hastily took power away from other lawmakers who had not been consulted yet. Sen. Rick Bennett, R-Oxford, called the jurisdictional changes “a badly timed idea with a lot of bad effects that we don’t even know about yet.”
Last year’s pension tax cut clinched early Republican support for a budget addition that the party turned on by the time it went to the chamber floors. Mills embraced it, while many progressives dislike pension tax deductions that largely go to higher-income retirees, according to a 2022 analysis by the liberal Maine Center for Economic Policy.
The Democratic changes, which tie the current tax break to inflation instead of raising it to $45,000, will split the party’s constituencies. On Sunday, the Maine Service Employees Association, the liberal state employees’ union, sent an alert to members criticizing the committee for balancing the budget “on the backs of retired state workers and teachers.”
“I look at this amendment as a tax hike on middle-income seniors and particularly retired state employees,” Bennett said early Saturday. “I don’t support it for that reason.”