$113M deficit addressed by economy chief Cashman speaks in Bangor on tax and business issues

BANGOR – Maine Department of Economic and Community Development Commissioner Jack Cashman visited one of the city’s more influential business groups to talk about growth strategies Friday, but instead had to answer questions about a projected state budget shortfall of $113 million.

From inquiries about whether taxes are going to be raised – including a suggestion on how to raise them – to whether the University of Maine’s libraries ever will be better funded, Cashman tried to balance reining in state spending while ensuring that programs essential to improving the state’s economy remain funded. He was the guest speaker at the Action Committee of 50’s monthly meeting.

A $113 million shortfall at the Department of Human Services that needs to be made up is causing state agencies to line up before Cashman and his boss, Gov. John Baldacci, and tell them, “Don’t look at us.” The shortfall is attributed to a change in how Medicaid benefits were funded, but did not include real money to fund the changes, Cashman said.

He sympathized with the group, saying that tough choices are going to have to be made, and he recognized that all decisions will have an impact on when Maine emerges into the new economy.

“Everything we do affects the economy,” Cashman said. “If you don’t think so, look at the mistakes made with Medicaid reimbursements. We’re all paying for it.”

On Friday, the most vocal opponents of any future cuts were supporters of the University of Maine System and its flagship campus, the University of Maine in Orono. Most of the opponents said any cuts would severely jeopardize programs that are tied into economic development. Namely, the cuts would affect research of new technologies and the education of a new crop of workers, they said.

Bangor lawyer Tom Brown said he believes he has found a solution that will not harm any programs. Brown said Maine should consider adding a surcharge to the state income tax that is the equivalent of the amount of money people received this year from the federal tax cuts.

“I don’t think most people in the room are going to feel it any differently if they are taxed this year what they were taxed last year,” Brown said.

Cashman countered that he didn’t think a new tax, albeit a temporary one, would be the way to go. He said Maine already has one of the top 5 tax burdens nationally, and businesses looking for places to set up shop consider tax rates when choosing a location.

He said anyone who doesn’t believe Maine’s tax structure hurts new business growth should “come sit down in my office for a week or two” and listen to what prospective businesses actually have to say about the state’s taxes.

How the state spends tax money was a concern for Mike Trainor, vice president of the Action Committee of 50. He questioned why Maine keeps “making wrong decisions” when it comes to spending federal money.

Cashman said he took exception to that comment. He said some expenditures were the right decisions to make, and some were not.

Cheryl Russell, director of Husson College’s Center for Family Business, reminded Cashman that any decision to cut the state budget could severely affect rural towns and businesses, and she hopes Baldacci, Cashman and the Legislature will keep that in mind. The center is assisting hundreds of small businesses that still are being affected by the loss of 22,000 manufacturing jobs during the last couple of years.

“They’re not looking for ways to thrive; they’re looking for ways to survive,” Russell said. “Those 30,000 small businesses [in rural Maine] are the spark plug for Maine’s economy.”