Highway fund raises new tensions over state budget negotiations

Partisan tensions over approval of the state budget are raising concerns about whether the Legislature will come together to fund road projects and public safety operations in time for the new fiscal year that starts next month.

The Mills administration and majority Democrats passed a partial budget in March to avoid a budget showdown – and possible government shutdown – over Republican protests and demands for tax cuts. The budget was framed as a continuing services budget, which kept the government open beyond June and funded priorities already passed by lawmakers.

Approving it in March meant majority Democrats did not need bipartisan support for the budget to take effect in time. Any budget adopted after April 1, on the other hand, would need bipartisan support of two-thirds of sitting legislators to take effect by the end of this month.

But, while Democrats passed a basic budget without Republican support, they left unfinished the state highway budget, which exists outside the core state budget but funds operations in the Maine Department of Transportation and Bureau of Motor Vehicles, as well as portions of the Maine State Police.

That means the proposed $400 million highway budget – a record investment proposal – will need Republican support for the money to be available at the start of the fiscal year. Without that support, the funding would not be available for 90 days after adjournment, likely leading to a partial shutdown of the agencies it supports.

It’s unclear the extent to which Republicans will apply their leverage over the highway fund to secure other budget concessions. Republican leaders have been angry about being cut out of the initial budget talks and have continued their calls for income and other tax cuts, while acknowledging they have little sway as the minority.

Senate Minority Leader Trey Stewart, R-Presque Isle, would only say “everything is in flux right now,” when asked whether Republicans would try to use the highway fund to win other budget concessions.

The Legislature’s Transportation Committee discussed the highway fund proposal Tuesday and raised questions about the specific impacts on state government operations if the proposal fails to win two-thirds support. Administration officials told them the impact would be significant, but that decisions would have to be made about how to use the funding they do receive through the core state budget.

Officials said $35 million in state police funding and other operational funding for the Bureau of Motor Vehicles is at stake, in addition to highway projects.

The committee must make a recommendation to the full Legislature, but members put off a vote Tuesday in hopes that more discussions can lead to a unanimous endorsement when they meet again on Thursday.

Republicans on the committee focused questions around the governor’s proposed one-time transfer of $200 million in surplus money from the general fund to the highway fund. Some members want a commitment to more permanent reforms that would ensure the highway fund remains healthy and stable in the future.

Rep. Wayne Parry, R-Arundel, said the time is ripe to make an ongoing allocation to the chronically under-funded highway budget, especially with record revenues and surpluses.

“We continue to spend the money elsewhere,” Parry said. “When will it ever happen if not now?”

Most of the highway fund revenues come from fuel taxes, as well as vehicle excise taxes and registration fees. Parry and other Republicans want the committee to back a bill, L.D. 713, that would devote about half of the taxes from the sales and use of automobiles and auto parts to the highway budget.

Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services, which oversees the state budget, said the governor has proposed “filling the gap of the operations of the highway fund” with the infusion of the surplus revenues. She reminded lawmakers the money would leverage three times as much in federal matching funds.

“It would be devastating to not move forward with that,” Figueroa told lawmakers.

Department of Transportation Commissioner Bruce Van Note said the department builds its work plan around the governor’s recommended budget, since that budget request has historically been funded at or near the recommended level, whether through borrowing money, unused surplus funding or a general fund allocation.

“To the 1,600 people with whom I’m very proud to be associated with – their job is to deliver and they do,” he said. “They know if something happens up here, they’ll have to adjust. But they don’t spend their days worrying about the debates that could happen under the dome.”

Rep. Austin Theriault, R-Caribou, said his support for the budget could hinge on whether the committee endorses a sustainable funding source.

“I can’t speak for my whole caucus, but a lot of people in the caucus are concerned about the long-term funding of highways,” Theriault said. “I’m willing to draw a line in the sand and say if there’s not some sort of sustainable long-term funding I may not be able to support the budget.”

Sen. Ben Chipman, D-Portland, who co-chairs the committee, successfully discouraged members from forcing a vote on the budget Tuesday, saying he wanted to give other committee members time to propose amendments in hopes of reaching consensus. The committee will resume work on Thursday.

Chipman said he supports the bill to dedicate tax revenue from auto sales and parts to the highway fund, but worries about efforts to fund this year’s highway budget, especially when a record amount of federal dollars through the Inflation Reduction Act are available.

“I’m just not sure about inserting something into this budget as an amendment and how that might fly in the caucuses versus having some short-term funding that maybe would fly better in the caucuses,” Chipman said. “I want to get us across the finish line, so we can get the federal funds. It doesn’t matter to me how we get there.”