Public Policy and Legislative Affairs Committee

Meeting Minutes

Tuesday January 19^th 2010

In attendance:  Kevin Freeman, Chair, Sara Devlin, Kim Volk, David Brenerman, Jeremy Fischer, Kathy MacVane, Scott Collins, Matt McKenzie, Tony Donovan, Pat Woodhouse, Judiann Smith, Jerry Angier, Jim Elkins, Tom Noyes, Roger Beeley, Judy Knapp, Todd Rothstein, Bob Nadeau, and Chris Hall

Guest:  Senator Peter Mills

1.  Approval of 12-15-09 minutes.  On motion by Angier, seconded by Elkins with all present voting to approve.

2.  Remarks and conversation with Senator Peter Mills.  Sen. Mills is a veteran Republican lawmaker who has previously served on the Education, Appropriations and Taxation Committees.  We continued last month's conversations on expected cuts in state aid to local K-12 education, school administrative consolidation's future, and the state budget crisis.

Mills circulated a 7 page hand out (attached as a pdf file) that provides a wealth of perspective on Maine's budget and revenue history.  The hand outs also summarize the current budget crisis, and shares a perspective from the Maine Municipal's latest newsletter.

Mills characterized the current budget crisis as a symptom of deeper structural problems that have built up in Maine over the last 50 years.  Mills noted that the state originally drew funding from an 1820 state property tax, plus excise taxes.  In 1950 the state's largest revenue source was the gas tax, and we were a road building state.  In 1951 a 2 cent sales tax fueled an expansion of education spending, and in 1965 federal Medicaid's advent changed the state's budget and fiscal picture forever by adding an ever-growing set of entitlements to our budget.

Mills outlined the current budget gap as even worse then it appears due to the current use of one-time federal recovery funds to shore up our state budget.  When those funds expire in 2011, our fiscal gap will grow again. 

Mills identified the themes of the current budget crisis as a shift from state to municipal fiscal responsibility, a resulting likelihood of property tax increases in many communities, and inflexibility at both the local and state level to adopt challenging restructuring initiatives.

Mills identified K-12 education cost drivers as fragmented local control over school operations, combined with over-identification of special education eligibility in too many school districts.  He suggested support for special ed rule changes designed to reduce identification rates to national norms, and encouraged further administrative consolidation.

Mills said that the Governor's budget has many across-the-board cuts that fail to take into account what works - and what doesn't work - in state and local programming.  He also suggested that the budget fails to recognize the unfunded retirement obligations facing state government, including unfunded pension commitments of $3.5 billion dollars and unfunded health care commitments of $2.4 billion dollars.

Mills compared our situation today to the fiscal crisis of the early 1990's, when he said that the state's fiscal crisis became an opportunity to reform both workers' compensation and state pension benefit levels.  He asked if we were going to use today's fiscal crisis to leverage structural reforms that would benefit Maine in the decades ahead.  He offered two main reform proposals:

First Mills identified the need to reform K-12 education by adopting merit pay for teachers and incenting greater use of certain testing systems in the schools, particularly NWEA (for reference see this DoE summary of all the assessment systems used in Maine).  He discussed the opportunities to measure classroom progress, and how those tools can be used to reward teacher excellence and lift the performance of school systems.  Despite union opposition Mills saw these reform options as great opportunities for Maine.

Second Mills suggested reform of Maine social services systems on the basis of objective performance and cost efficiency reviews, moving contracts to low cost, high quality providers and eliminating contracts to those who fail to meet object standards of excellence.  Mills referred to Spurwink as an example of low cost high quality excellence, and emphasized that across-the-board cuts wind up costing the state more than necessary. 

In Q&A Mills made the following points:

• More funding in social services or in K-12 education does not correlate to better outcomes;

• Political gridlock in Washington is bad, but state house politics aren't so polarized;

• In a discussion of transportation policies Mills welcomed investment in rail and other alternative modes, and asked for suggestions on how Maine can solve its current transportation funding problem by identifying new options, including a June 2010 referendum on massive new infrastructure investment;

• State pension reform is still needed, especially portability, in either a new contributory or defined benefit plan;

• HHS reform is a longer-term project - there's little to do to overcome across-the-board cuts in this legislative session;

• A tax increase to avoid budget cuts will be very difficult to pass at the state house this session; and

• Open primaries - where independent voters could participate in either partisan primary election - would strengthen moderate candidates but is an unlikely reform to come from the state house.

3.  New legislation - local option tax?  Chris Hall provided members with a summary of new bills and asked for feedback via email.    One upcoming issue of note is revival of the local option tax still before the legislature in LD 1253, a carry-over bill that will be a vehicle for any effort to create a local option tax this year.  With many local officials calling for local option as a budget tool to avoid cuts, Hall expects the Chamber will be asked to take a position on LD 1253 - as it may be amended - in the coming weeks.  Your feedback is requested!

4.  Changes to PPLA and policy-making process.  With Sen. Mill's presentation taking up almost our entire time we moved this discussion to our February agenda - no final action is expected before then as Community Chambers are still discussing the draft as well.  Members are encouraged to send Chris Hall any comments, concerns of recommended changes.

5.  Adjourned at 9 am.