A PLAN FOR TAXES

David Flanagan was known, briefly, as an unsuccessful candidate for governor and, for a long time, as the successful leader of Central Maine Power Co. While on the campaign trail he developed a lengthy overview on the nature of the state’s budget problems and some possible solutions. As lawmakers return to Augusta this week, they would usefully refer to it.

Mr. Flanagan’s thesis is that Maine’s budget problems are structural, not merely the result of the hills and valleys of the economy and not something that changing the mix of state and local taxes would repair, although Maine’s tax volatility – narrow sales tax, steep income tax – also contributes to the problem. Largely, he says, the structural problem is one of formulas, including school funding, Medicaid, child welfare, that lock the state into paying an amount regardless of the revenue available. (The dishonest discounting of certain school expenses by legislators shows this is only partly true.) He also sees Maine as having a culture that can always find another worthy cause to fund and, if the state doesn’t identify them, the judiciary will through consent decrees.

His proposed solution could be summarized by this observation: “So, when we hear that Maine has already cut the fat out of its budget, and is now down to muscle and bone, we are entitled to ask ‘compared to what and to whom?'” It is a fair question because all states are in a competition to offer the right services at the lowest costs. Considering the important, sometimes life-and-death services offered and the fact that residents of a state are not its customers but, in effect, its owners, the parallel with business is not close to exact. But the bottom-line calculation of keeping down costs while making the revenues match expenditures is similar.

Mr. Flanagan’s proposal would have the state make department-by-department, program-by-program comparisons with other similarly situated states. Such an examination is complicated and would take months but it would be useful for years in knowing where Maine’s budget stands compared with others.

As examples, Mr. Flanagan offers possible ways of comparing specific budgets. Maine might, for instance, examine its education budget based on the average cost per student in the six New England states; its Medicaid budget based on the average eligibility and benefit criteria for the New England states; its welfare benefit eligibility maximized at the average of Vermont and New Hampshire; and the cost per department of the remaining 25 percent of the state government. Lawmakers might disagree with these measures or find some that better reflect Maine’s demographics or the demographics it desires, but such an examination would give Maine an added reason for its tax levels.

And in addition to spreading the word nationally that Maine administers its taxes carefully, it would build confidence in the public that its money is being well-spent, that the services offered reflect a broader consensus of what is affordable.