AUGUSTA, Maine — Even as lawmakers seek to close the $221 million Medicaid budget gap, other areas of state spending, including tax breaks for businesses, are expected to be scrutinized during the coming legislative session.
The state’s budget problems may grow in January as shortfalls in other state agencies and potential reductions in federal funding are identified, according to lawmakers.
“It seems fair and equitable to look at the entire budget and that is what we want to do,” said Rep. Peggy Rotundo, D-Lewiston, lead Democrat on the Appropriations Committee. “We know there is a shortfall at [Maine Department of Health and Human Services], but we don’t know about the rest of government.”
She was instrumental in having committee staff members assemble a list of the many tax breaks currently on the books for businesses that were discussed earlier in the month. She said tax expenditures should be on the table for discussion as well as other spending items.
“We are interested in looking at the budget as a whole,” she said.
Rep. Pat Flood, R-Winthrop, House co-chairman of the panel, said he doubts that a discussion on tax breaks will be “productive” in meeting the demands for balancing the budget. He said the Taxation Committee, which is the forum for considering tax policy, reviews business tax policies regularly.
“We have done those reviews and analysis of those things ad nauseum, and it is really hard to get closure on whether those things work or not,” he said.
Sen. Richard Rosen, R-Bucksport, said the only issue before the committee right now is the Medicaid shortfall and Gov. Paul LePage’s proposal to fill that gap. He said while there may be another supplemental budget, the committee cannot act on speculation.
“We can only deal with what is before us,” he said.
Finance Commissioner Sawin Millett has told the panel there will be at least two more budget bills for the Legislature to consider. One is the measure to implement the $25 million in cuts found by the budget streamlining task force of which he was chairman; and a second for the growing list of non-Medicaid budget problems the state faces.
“That should be ready by mid- to late January,” he said in a recent interview. He said it would be the “traditional” supplemental budget that addresses such items as fuel costs to heat state buildings and other budget shortfalls across all state agencies. It also will address non-Medicaid budget needs at DHHS, such as a shortfall in General Assistance.
Sen. Dawn Hill, D-York, the only democratic Senator on the panel, said unlike House Democrats, Senate Democrats have yet to caucus on the budget proposal. She said there are several options for dealing with the budget, including limiting the Medicaid fix to the remaining months of this fiscal year and considering the second budget year of Medicaid needs along with all the other budget demands.
“I am not sure where I come down,” she said. Hill said she is “not ready” to tackle business tax breaks as part of the solution until she has more information on those that may not be performing.
“That discussion can lead to uncertainty that then leads to businesses deciding to place their investments elsewhere where they believe the climate is more certain and more dependable,” said Sen. Chris Rector, R-Thomaston, co-chairman of the Legislature’s Labor, Commerce and Economic Development Committee. He said the committee has looked at tax policies and determined that many have created jobs, including the Pine Tree Zone program started by then-Gov. John Baldacci, a Democrat.
Rector agrees that the various tax breaks for businesses need to be reviewed on a regular basis to make sure they are working. He said a good model would be the one his committee uses to assess research and development bond expenditures.
But not all in the business community agree with Rector that a review would be negative. Chris Hall, vice president of the Greater Portland Chamber of Commerce, said with the serious budget problems the state faces, the business community should expect current tax benefits to be challenged.
“I think this is a conversation we know has been coming for a while, that is inevitable,” he said. “If these studies are correct, we are going to find that a lot of what we have on the books is working for us.”
Hall said a recent ranking by the tax firm of Ernst and Young indicated Maine has the best business tax investment climate in the country. He said that has been the result of bipartisan efforts over the last decade to craft tax policies to help create and save jobs.
“It’s very important to look at the number of jobs we have kept in the state because of our tax policies,” he said.
The Appropriations Committee meets again Jan. 3 to work on the governor’s budget proposals.