Will Maine adopt a biennial budget that sustains investment vital to our economic recovery and future prosperity? Or will the budget that emerges from the Legislature focus on giveaways to special interests and the wealthiest taxpayers?

These are key questions the Maine Center for Economic Policy seeks to answer as we analyze Governor Paul LePage’s proposed budget, his statements and statements from his administration. There are costs and benefits associated with every budget choice and none of the choices are easy. The Legislature and the public must now consider whether the particular choices Governor LePage has outlined are the best ones to promote present and future prosperity for the greatest number of Maine residents.

In his Feb. 10 address to a joint session of the Legislature, the Governor described his budget as a “jobs bill.” With more than 100,000 Maine people unemployed, discouraged from seeking work, or underemployed, encouraging economic growth and job creation is desirable, but in reality, state government has limited tools to affect private sector job growth.

Some state actions have more and others less effect on jobs. State spending has immediate impact on both public and private sector jobs. Much state spending directly supports workers in health care, education, and construction. 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 is no shortage of private capital in Maine and innovators continue to invest in large and successful private enterprises. Contrary to the Governor’s claim that state borrowing hurts private enterprise, many of these enterprises 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 maintains 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.

Governor LePage also proposed tax cuts that when fully implemented will provide more than half of their benefits to the wealthiest 10 percent of taxpayers.

Families earning between $28,000 and $48,000 annually would receive an average tax cut of $83, while those with income over $360,000 would receive an average tax cut of more than $2,700. These cuts will also have consequences, increasing the state’s current $780 million budget shortfall by more than $200 million. His plan to double the estate tax exemption to $2 million alone will benefit just 550 families but cost the state $30 million over the biennium, roughly the cost of proposed cuts to health care for working families and prescription drug cost relief for seniors.

The Governor’s largest single proposed revenue savings measure — $524 million — is taken directly from the incomes of state retirees who currently receive an average of $18,500 per year. Retiree advocates expected the Governor to propose some changes in the way the state pays for its unfunded pension liability, but to take every penny out of retirees’ benefits while transferring all the savings to other needs, is unfair.

During the campaign, Governor LePage emphasized his credentials as a corporate CEO; however, his budget and tax policies represent an ill-advised departure from standard business practice. Like any large business, government needs to invest in its facilities and its people to compete effectively in the global markets. With Maine’s economic recovery still in its fragile, early stages it is especially important that we maintain vital public services and make desperately needed investments to repair and expand infrastructure on which growing businesses depend.

MECEP encourages the Governor and the Legislature to rethink current proposals and pass a budget that will keep open the door to success and prosperity for all Maine families.

 

Christopher St. John is Executive Director of the Maine Center for Economic Policy.