Good news, bad news

Maine state government ranked above average for its sound budgeting practices in a report released yesterday by the Center for Budget and Policy Priorities. But, while Maine is better than many states at fiscal planning, there’s more we can do, especially around evaluating tax breaks for lucrative out-of-state corporations.

The good news: On a scale of 10, Maine ranked 7 for doing prudent things like producing an independent forecast of state revenues, generating regular budget status reports, having nonpartisan staff review and analyze the budget and other spending bills, and providing for well-designed rainy day funds.

The bad news: Maine does not sufficiently scrutinize its business tax expenditures, things like tax credits, deductions, and exemptions that reduce state revenue.[1] Maine spends more than $11 million a year to give income tax credits or exemptions to companies that buy business equipment, that locate and create jobs in certain designated Pine Tree zones, that perform research on new technology, and whose income falls under foreign jurisdictions (tax havens). These tax giveaways cost Maine’s taxpayers money just like spending for schools or road construction. Yet they receive little or no scrutiny.

As one former legislator and member of the Appropriations Committee Lisa Miller said recently, legislators pour over every part of the state budget with a fine-toothed comb to find savings but conduct virtually no oversight of the millions in revenue lost to tax expenditures.

According to the Center,

The more that states spend on tax expenditures, the less they have for direct spending programs, or for reductions in tax rates. This trade-off should be made explicit in order for a state to plan wisely for the future. Yet often it is not.

What’s more, policymakers have largely ignored a report from Maine’s Tax Expenditures Review Task Force. The task force, created at the behest of the legislature in 2013, examined the revenues the state forgoes by sanctioning tax subsidies. They recommended establishing an ongoing, independent review process to evaluate the effectiveness of tax expenditure programs, placing caps and other limitations on some programs, and eliminating some programs.

While Maine spends millions to benefit corporations more Mainers are suffering from homelessness and hunger. The least our leaders could do is periodically review whether these tax break programs are delivering on their promises to boost Maine’s economy or simply taking resources away from other high priorities.

[1] According to the report other things Maine could do to improve its fiscal health are: produce spending forecasts of what state programs will cost into the future, analyze the budget impact of spending bills beyond the current two-year budget, improve pension oversight, and show state budgeters (in the budget document) estimates of what it will cost to deliver the same quantity and quality of services to residents it is delivering currently so that they can better understand how changes to that budget would affect public services.