Maine Legislative Leaders Strike Budget Deal as Shutdown Looms

Maine's legislative leaders reached a budget deal late Thursday that would scrap a voter-backed tax on high-income earners while increasing education funding, a compromise aimed at averting a government shutdown.

Lawmakers plan to put the deal up for a vote Friday, but it is unclear whether the compromise will satisfy the broader legislature or Gov. Paul LePage, who has begun preparations for the state's first government stoppage since 1991.

The new two-year, $7.1 billion deal brokered Thursday by the Democratic House speaker and Republican Senate president included compromised versions of what both sides have been seeking, but also some measures that could become sticking points.

"In a divided government, compromise is the only option," Maine House Speaker Sara Gideon said in a statement Thursday night. "We did our job in the face of tremendous pressure. I urge my colleagues to support this proposal and urge the governor to take action immediately."

A six-member committee working on the budget voted 5-1 Thursday night to advance the new proposal. The broader legislature could vote at some point Friday afternoon, a spokeswoman for the speaker said.

Maine is one of a handful of states pushing budget talks up to the very end of the fiscal year, which is June 30 in all but four states. Other states locked in debate include Illinois, which hasn't had a budget in two years and faces a credit downgrade to junk status if a deal isn't reached. Connecticut and New Jersey are also pushing the limit and face stark consequences if budgets aren't completed by midnight.

The flurry of 11th-hour negotiating reflects the underlying revenue weakness that has broadly dogged states in the last two years and inflamed debates over how to spend the limited resources, according budget experts.

In Maine, the deal state House and Senate leaders will put to the floor includes a repeal of a 3% additional tax on those with annual incomes exceeding $200,000 that voters backed by referendum in November to raise money for education. The compromise includes $162 million in education funding, which is about half of what tax proponents hoped to raise and less than Democrats recently sought.

The overall budget price tag is higher than Mr. LePage has said he wanted and includes a lodging-tax increase.

Speaking during a Thursday-night budget committee meeting, state Sen. Roger Katz, a Republican, laid out the stakes.

"All 186 of us are going to get to push a button," he said, referring to the vote among all House and Senate members. "Press red and we'd be voting to shut down state government with no identified path ahead."

On Thursday, Mr. LePage blasted a prior proposal that came from Senate Republicans, upset with one type of tax rising without another decreasing. On a radio show, he said that a shutdown would be "necessary for the future of Maine."

"There is still no budget," a spokesman for the governor said early Friday, when asked about the legislative compromise. "Once a budget hits his desk, he may have a comment."

The governor can wait 10 days to veto the budget and in the interim the government would shut down even if lawmakers have enough votes to override a veto. On Thursday, Mr. LePage said he was ready to do that.

The legislature will need to pass the measure with a two-thirds majority to get the bill to Mr. LePage in the first place.

Write to Jon Kamp at jon.kamp@wsj.com

(END) Dow Jones Newswires

June 30, 2017 09:59 ET (13:59 GMT)