Thursday, October 23, 2003

Teachers’ unions, business back competing tax proposals

Published in the Current and the American Journal

Tax reform in Maine is attracting big dollars from the state’s businesses and teachers’ unions, as funds flow in to the coffers of groups supporting the two alternatives on the Nov. 4 ballot. Some of the groups say they are concerned about property taxpayers, but many also have their own agendas.

A chart on this page (corrected from previous versions published in this newspaper) lays out the school funding numbers presented by each side.

Question 1A was devised by the Maine Municipal Association, the statewide association of town councils and town managers. Over the past year, the MMA has donated $320,000 to the political action committee backing the question.

The largest backer for that PAC, however, is the National Education Association, based in Washington, D.C., which has donated $350,000 in the past four months by passing funds through the Maine Education Association, the state’s teachers’ union.

Part of the reason is because Question 1A would dramatically increase state education funding immediately, said Rob Walker, president of the MEA. Further, “there is a chance that some of the money will not go to tax reform” but instead will be used by towns to pay their teachers better, he said.

He is touring the state, giving presentations to groups of teachers about the referendum and encouraging them to vote.

“We’re finding that the more questions we answer” the more likely people are to support Question 1A, he said.

Business backs 1B
Question 1B was developed by Gov. John Baldacci and the state Legislature as a so-called “competing measure” referendum, posing an alternative to the MMA proposal. Question 1B is drawing support from businesses around the state.

Dana Connors, president of the Maine State Chamber of Commerce, is the chairman of the PAC. Question 1B sets education as “one of our state’s highest priorities,” and pays for it through existing taxes levied on an expanding economy, rather than creating new taxes, he said. Some districts will see less money initially, “but that’s more than compensated for” in future years, Connors said.

The PAC has received funds from many big-name companies, including $50,000 from International Paper, $35,000 from National Semiconductor, $25,000 each from L.L. Bean and Sappi, and $15,000 from UnumProvident.

“We’re very concerned with the fiscal implications of Question 1A,” said Steve Clarkin, regional public affairs manager for International Paper. “The state can’t afford Question 1A without resorting to tax increases.”

One tax break he and many other companies fear may be first on the chopping block is the Business Equipment Tax Rebate, in which the state returns to businesses the amount they pay to towns in personal property tax on business equipment, including manufacturing machinery.

“Our biggest concern would be the BETR program,” Clarkin said. IP is also concerned that just cutting BETR wouldn’t save the state enough money, requiring increases in taxes on services – including accounting and legal work – and the elimination of sales-tax exemptions businesses now enjoy on new production equipment, raw materials and energy used for manufacturing.

“National is backing 1B,” said spokesman Anne Gauthier. “We believe that the phased-in approach is a more fiscally responsible approach.”

BETR cuts also worry her. In 1997, National began investing $950 million in its South Portland facilities, and expects the full benefit of BETR tax breaks to come over 12 years. Eliminating that now would be a big concern for National, she said.

Pushing real reform
L.L. Bean is also weighing in to support Question 1B. “It breaks the inertia of the whole tax-and-spend issue,” said company spokesman Rich Donaldson.

It provides immediate tax relief to the most needy Mainers, and forces towns to make their own decisions on educational funding.

Now, “any town can say, ‘This is what we need for education funding,’” he said. That ups the state’s total expenditure for education without a centralized plan for determining whether those expenses are necessary.

Question 1A “just sends more money to municipalities. That’s the danger of it,” he said. Towns “have a long and strong history of increasing spending” when they get more money.

“Local governments are going to continue to spend what you give them,” he said. Changing the education funding formula will give them what they need to provide a good education, but will make clear the line between what is deemed necessary for a quality education and what is optionally selected by the town, Donaldson said.

UnumProvident spokesman David Brenerman called Question 1A “a significant financial problem for the state.” He worries that the state may already be facing a $500 million funding shortfall for the next budget cycle, and asking for an extra $250 million a year could break the bank.

“Tax reform is a slow process. It can’t happen all at once,” said Brenerman, who is a former mayor of Portland. “Along with tax reform there needs to be spending reform,” he said.

Some towns back 1A
Not surprisingly, many town councils and school boards are supporting the proposal developed by their umbrella group, the MMA. The Cape Elizabeth School Board has endorsed it, and last week many councilors also voiced their support.

“Clearly 1A (the MMA proposal) is the option for folks in this community,” said Cape Councilor Jack Roberts at a council meeting. Cape Council Chairman Mary Ann Lynch also supports 1A. She is “skeptical of the dire Chicken Little” behavior of legislators who claim that 1A will bankrupt the state. A year ago, legislators handled a $1.2 billion shortfall in the state budget without a tax increase, she said. “It’s a question of priorities. … They’ve closed larger budget gaps in previous years without tax increases.”

South Portland City Manager Jeff Jordan recently sent councilors a memo about each of the proposals. They indicate that if Question 1A were to pass, South Portland would have the second-largest increase in school funding – $5.2 million – among all the towns in the state. (Portland’s increase would be higher.)

If Question 1B were to pass, South Portland would have the greatest loss in school funding – $2.8 million – of any town in the state, Jordan wrote.

Windham Town Manager Tony Plante said his town’s council has not taken a position, but did not support a resolution supporting the MMA proposal (Question 1A) when it came up for a vote. The council has not supported Question 1B or opposed either, he said.

None of the above
Jerre Bryant, Westbrook’s administrative assistant, opposes both, though the City Council has not taken a formal stand.

“They both fall woefully short” of “true tax reform,” Bryant said. Question 1A does not explain where the state should come up with the funds, while Question 1B “not only doesn’t help but harms Westbrook” and other towns. “Neither of these proposals are sound public policy,” he said.

Supporting neither proposal demands better action from the Legislature and the governor, he said. “We desperately need tax reform. We desperately need property tax relief.”

There is an option on the ballot – 1C – to oppose both tax plans. Bryant expects that Carol Palesky’s Maine Taxpayers Action Network tax-cap proposal will get on the ballot next year, and hopes a solution can be devised before that happens. Walker, of the MEA, also wants a tax-reform solution approved to “head off” Palesky’s efforts, which he fears will catch the attention of many taxpayers, and require towns and cities to make drastic spending cuts, hurting teachers.

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