AUGUSTA – They knew it was coming, but even the veteran lobbyists who work for the business community were astonished at how badly they lost on key issues in the Legislature.

“It certainly has not been a good session for business,” said Jim McGregor, executive vice president of the Maine Merchants Association. “The business community has had to spend a whole lot of time having to battle what in our minds were anti-business bills.”

He said that on issue after issue, from funding to labor matters, the business community came up short when lawmakers set the priorities and cast their votes.

“We certainly did nothing to improve the state’s business climate,” Chris Hall, vice president of the Maine State Chamber of Commerce said late Friday evening. “Just look at the impact of the BETR cut. We have sent a clear message to the investors in this country and across the world that the promises Maine makes to companies may not or will not be kept. That’s a terrible message.”

John Williams, president of the Maine Pulp & Paper Association, said the 10 percent reduction in the Business Equipment Tax Reimbursement program will likely have an impact far beyond the dollars lost to business and industry. The reduction was part of the budget revisions adopted by majority Democrats that removed borrowing for current services from the budget.

Williams said the cut could lead to large international companies, like those in the paper industry, making investments in states that do not tax business equipment.

“I hope not, but I am very much afraid of that,” he said. “I fear they will wonder if they should put an investment in Maine not knowing whether they will be reimbursed for this tax in the future.”

The reduction translates into $7.5 million in 2006, but Gov. John Baldacci said he will work to restore the funding and totally repeal the property tax on business equipment.

“It is very important for me to repeal the personal property tax,” he said. “I have an agreement with legislative leaders to bring back legislation in January to repeal the personal property tax.”

He said he plans to work with legislators over the summer and fall and have a plan to repeal the tax. He acknowledges the effort this year was stymied by municipal officials who opposed the shift that would occur if the state only meets the constitutional requirement to pick up half the cost of the tax repeal.

“If we do this appropriately, with the increase in aid in education going to communities, communities will actually see a slight gain,” he said. “The [State] Planning Office has done some numbers on that.”

Sen. Lynn Bromley, D-South Portland and co-chairwoman of the Legislature’s Business, Research and Economic Development Committee, was not happy with the BETR cut, even though she voted for the budget bill that included the cut.

“Eventually, we have to repeal this tax entirely,” she said. “When you think about taxing someone for a piece of equipment before they have made a dollar of profit, it doesn’t make much sense.”

Hall said total repeal of the tax has long been sought by the business community, but the issue never made it to the full Legislature for a vote this session.

“We may be able to turn this defeat into a victory later,” he said. “But for right now, the message is clear and it is negative.”

Hall said that if it were the cut in BETR alone, the business community would be upset. But he said the session did very little to improve the state’s business climate while doing a lot to hurt it. The Maine Growth Council found earlier this year that Maine is 10.1 percent above the national average for the cost of doing business, and Hall said that has worsened.

“That cost is going up as the result of the actions of this session,” he said. “That affects all businesses, large and small.”

David Clough represents the Maine branch of the National Federation of Independent Businesses. He said the session sent several negative messages, such as family leave legislation that he says is trying to micromanage company-leave policy and continuation of the part-time unemployment benefits program, although it could have been worse.

“I am thankful they did not raise the major taxes that would have had an impact on everyone, including businesses,” he said. “But we are looking at a potential $40 to $50 million tax on businesses and employees to subsidize the Dirigo agency.”

Clough was referring to legislation that authorizes Dirigo to assess a tax of up to 4 percent on claims paid by insurance companies to continue its operations. The actual tax level will be set by the amount of savings the agency determines the insurer or self-insured company realized because of the various health care cost controls in the Dirigo law.

Clough was optimistic at the start of the session that several small-business bills packaged as the Small Business Initiative by House Speaker John Richardson, D-Brunswick, would be approved and help small businesses. Action on all but a few was deferred until the January session because they had price tags ranging from a few thousand dollars to millions.

“There was no money,” Richardson said. “A few got passed because they had no financial impact, but the rest will stay tabled. I think, come January, we will have some money to move forward on these.”

But like the cut to BETR, the business community is looking at what was passed this session, and it doesn’t like what occurred.