While the Governor described his proposed budget as a “jobs bill” in his address to the Joint Convention on Thursday, how can he ensure that the tax and budget cuts he proposes will actually increase private sector jobs?
Every Governor at a time when over 100,000 Maine people are unemployed, discouraged from seeking work, or underemployed would hope their budget will increase jobs. The reality is that state government has limited tools to affect private sector job growth. Some state actions have more and others less effect on jobs. Governor LePage relies on the mistaken idea that tax decreases and the consequent service cuts will automatically lead to private sector job growth. In fact, state spending has immediate impact on both public and private sector jobs. Workers in health care, education, and construction are supported directly by state spending. Cuts in these areas will lead to immediate job losses and ripple through the economy. Increasing or reducing taxes on the other hand has a less direct effect on consumer and business spending in Maine, and thus less direct effect on jobs.
There are costs and benefits associated with every budget choice and none of the choices are easy. The role of the public and legislature now is to consider whether the particular choices Governor LePage has outlined are the best ones to maximize present and future prosperity for the greatest number of Maine residents.
What evidence is there to support the Governor’s claim that “state debt has placed job-killing demands on our private sector”?
There is no shortage of private capital in Maine. Where that private capital has found attractive market opportunities it has been invested in large and successful private enterprises. Many of those investments depend on a wide variety of public investments– from the roads and bridges that they, their customers and their suppliers use to the clean air, water and land on which so many Maine businesses depend. Because Maine has maintained a good credit rating and low debt per capita, the state has had no problem either borrowing or retiring our debt with a relatively low portion of current revenues. In fact very few individuals and businesses have been able to succeed without taking on some level of debt. The key is that debt is used responsibly.
What is the basis for the Governor’s assertion that in Maine the “cost of citizenship and business ownership is too high”?
Census data shows that Maine’s total state and local revenues per capita are below the US average. Further lowering Maine taxes may be an attractive goal, but it will have consequences. The tax changes the Governor outlined in his speech would actually increase the state’s current $780 million budget shortfall by over $ 200 million. Furthermore, we must weigh the impact each of proposed tax cuts will have on opportunities to maintain or increase essential spending on higher education, job training, or health insurance for working families.
Other than ideology and anecdotes, what factual evidence is there for the Governor’s claim that Maine’s estate tax has jeopardized any Maine family business or farm, or been the cause of significant numbers of wealthy Maine seniors changing their residence?
Current Maine law exempts the first $1 million of any estate from estate tax. Clearly only a very small minority of Maine families will pay an estate tax under present law. In fact when Maine Revenue Services and a team at Harvard’s Kennedy School of Government studied tax return data in the late 1990s they found that more seniors with wealth and higher incomes move into Maine every year than move out.
It is particularly distressing that the Administration proposes to give up as much as $20 million in revenue from very large estates at the same time it proposes to take a similar amount from health and food subsidies for some of the most vulnerable families in Maine.
What is the basis for the Governor’s claim that anyone who currently lives in Maine or moves here has “instant eligibility” for welfare benefits?
There is an application process and verification procedures that can take several weeks when people are in desperate circumstances. Any change in that process will likely cause additional hunger and homelessness and untreated health problems. We must ask those who support further reductions in the estate tax whether the costs to those most in need truly outweigh the gains for a very few of the wealthiest.
Why did Governor LePage conflate the relatively low level of Maine’s bonded debt with the relatively larger “unfunded actuarial liability” (UAL) of the Maine Public Employees Retirement System (MePERS)?
It is true that at present the state’s constitutional mandate to reduce unfunded pension liability requires a larger share of current revenues because of the significant stock market losses which occurred in 2008 and 2009. But it must be made clear that these obligations were not incurred over the last two decades, but rather are unfunded commitments by legislatures over several decades before that. It is simply wrong to imply, as some commentators have, that legislatures since 1995 have compounded the problem, or that the whole problem should be solved by simply reducing the livelihoods of state and teacher retirees.
Even when the pension UAL is combined with all state debt, a January 26, 2011 ranking by Moody’s Investor Services places Maine at 17th among states. In his speech, the Governor suggested the best way to address the UAL is 1) forego any cost of living increases for public retirees over the two years of fiscal 2012-13 and 2) limit future annual cost of living increases ever after to 2%.
The largest single savings measure announced in the Governor’s address- $524 million -is taken directly from retirees who currently receive on average between $18,000 and $19,000 per year. Retiree advocates expected that the Governor would propose some changes in the way we pay for the unfunded liability, but to learn that every penny will be taken out of the retirees, with the state as employer transferring all the savings to other needs, seems unfair.
How will the Governor’s opposition to “bonds, borrowing or deferred payments of any kind” for the biennium ahead affect Maine’s economic recovery and prospects for future prosperity?
During the campaign, Governor LePage emphasized his credentials as a corporate CEO. However, his total rejection of bonding, at least over the next two years, suggests a departure from standard business practice. Every large business or government needs a regular capital investment program to maintain and improve the capital stock (e.g. roads, bridges, classrooms, etc.) that the public owns and uses every day. With interest rates as low as they are and with Maine’s proven record of prudent borrowing, taking new bonds off the table is not sound public policy. With our economic recovery still in its fragile, early stages giving up opportunities to maintain essential transportation and other infrastructure, waiving large matching federal funds, and missing the job opportunities such bonding could provide is unwise. We hope the many legislators who have sponsored bond proposals can persuade two thirds of their colleagues at which point the Governor’s position would no longer matter.
The Legislature has studied transportation funding numerous times over the last several years. Those reviews suggest that it will simply not be possible to keep up with essential repairs and maintenance solely through additional efficiencies that may be found after years of reducing Department of Transportation staff and streamlining its operations.
While the Governor’s proposal to increase General Purpose Aid to Education is welcome, how will the additional $63 million actually increase education funding when it barely offsets federal funding under the American Recovery and Reinvestment Act that will soon expire?
Likewise, the Governor’s pledge of “no cuts” to higher education is welcome, but when some colleges are experiencing large increases in enrollment, and must cope with increasing costs, “flat funding” will make it difficult to keep higher education affordable for Maine students and their families.