AUGUSTA — A federal decision to stop paying for some mental health services for jail inmates will cost the state an additional $10.5 million next year, lawmakers learned Wednesday.

A proposal to cover that cost is part of Gov. Paul LePage’s newest plan to balance the state’s two-year $6 billion budget. In all, the new plan includes nearly $38 million in new spending cuts and tax cuts.

LePage’s plan calls for spending more money in some areas, such as funding for increased security at county courthouses and to help solve computer crimes. It also would cut money from higher education and other areas, and it includes several proposed tax cuts to benefit retirees and businesses.

It’s one of two contentious budget proposals left to be debated by lawmakers, who also must address a separate $100 million gap in the Department of Health and Human Services. That gap is for fiscal year 2013.

On Wednesday, DHHS Commissioner Mary Mayhew told members of the Appropriations and Health and Human Services committees that a new interpretation of an existing federal rule means the state no longer can get federal funds for some inmate mental health care.

Specifically, the state cannot get reimbursed for those who are transferred from a local jail to Riverview Psychiatric Center in Augusta to be stabilized, those ordered for a psychiatric evaluation, those who are not competent to stand trial and those found not criminally responsible.

That will leave a $10.5 million hole in the state budget in fiscal year 2013, she said.

“We see it as critically important to make this change and provide the necessary General Fund support,” she said.

Lawmakers are preparing for a series of public hearings on the budget next week. Although the committee originally intended to hold hearings starting Monday, they have been pushed back to Tuesday, Wednesday and Thursday.

Mayhew also further explained proposed changes to general assistance, a welfare program run by cities and towns that is partly state-funded. The department is requesting $6.6 million in additional funding for this fiscal year and next, but it cannot afford the full amount that will be needed to provide services, she said.

Because of that, the department is proposing to:

* Limit housing assistance to a maximum of 90 days per calendar year to save $3.3 million. That change is expected to affect Portland, South Portland, Bangor, Lewiston and Waterville most dramatically, according to DHHS.

* Put all cities and towns at a 50 percent reimbursement rate. As it is now, bigger towns can qualify for a 90 percent match after they spend a set amount of money. The change is expected to affect Portland, Bangor, Lewiston and Caribou and would save $1.4 million.

* Eliminate general assistance for anyone who already receives federal Temporary Assistance to Needy Families funds, to save $978,666.

In addition to the DHHS briefing, lawmakers also got more details about proposed tax cuts.

The governor is proposing to reduce taxes in four areas, two of which won’t cost any money until the next two-year budget cycle.

LePage is proposing to:

* Increase the exemption amount for pension income from $6,000 to $10,000 starting in 2014, and increase it in $5,000 intervals until it reaches $35,000 in 2019. There’s no cost this year or next. It is projected to cost $36 million in the next two-year budget cycle and continue to increase each year. Estimates show it would cost $105 million in 2019.

* Exempt from state income tax active-duty military pay earned outside of Maine starting in 2014. There would be no cost in this budget cycle, but it would cost $2.7 million in the next two-year budget.

* Create a new sales and use tax exemption for medical equipment used in respiratory ventilation, which would cost $373,850 this fiscal year and next.

* Refund the sales tax on machines and equipment used in commercial wood harvesting, and for commercial greenhouses and nursery products. That would cost $368,000 in fiscal year 2013 and $1.7 million in the next two-year budget cycle.

Department of Administrative and Financial Services Commissioner Sawin Millett said the governor wanted to start a dialog about the tax cuts now, even though some of them won’t take effect until 2014.

“They are designed to make Maine more attractive to people to stay here in their retirement years,” he said. “We’re trying to send a signal that Maine is open for business. Everything that is in this bill would be beneficial in the long term.”

Democrats continued to express concern that the tax cuts aren’t paid for in future years, which will create budget gaps.

“I’m struggling to see how we can afford any of this,” said Rep. Seth Berry, D-Bowdoinham, a member of the Taxation Committee.

Others asked for revenue projections in future years to see whether economic changes will help offset the lost revenue associated with cutting taxes.

“What concerns me is to be open for business, we have to have revenues,” said Sen. Dawn Hill, D-Cape Neddick. “I don’t think these are numbers we can take lightly.”


Susan Cover — 620-7015

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