BETTER BUDGET QUESTIONS

Robert Tannenwald, director of the New England Public Policy Center, part of the Federal Reserve Bank of Boston, has two responses to the question of whether Maine’s tax burden is high:

“Yes, but …”

“So what.”

His two-word responses are meant to point out what is often missed in Maine’s discussions about funding public services: the numbers alone don’t say nearly enough about Maine’s spending to allow for thoughtful reforms to its taxing and spending. Mr. Tannenwald urged Maine this week to think beyond the numbers to more interesting questions.

He did so at a conference by the Maine Public Spending Research Group, which brought together economists, politicians, advocates and citizens interested in the process of government to help determine where Maine spending stands and to measure where it is going.

It is an important project, one this newspaper was pleased to encourage, because it seeks common standards to improve general understanding of how Maine budgets nearly $10 billion annually.

One way to get to more interesting questions would be for Maine’s fiscal liberals to admit that state and local governments impose a very high tax burden while conservatives could return the favor by dropping their insistence that this burden drives all business decisions.

Having settled that, the sides could move on to some of Mr. Tannenwald’s questions, which include the following: Is Maine’s tax system competitive or does it drive out mobile employers and investors? Does it produce enough revenue to finance an adequate level of service, no more and no less? Is it stable? Neutral? Fair? Can more of it be exported? Can taxpayers understand it?

Currently, it is difficult for anyone to answer any of these questions, but a conference this week in Hallowell began to change that.

A couple of points from the conference:

. Several other speakers pointed out that not all spending is equal. Maine values certain ideas – the importance of education, protection of the environment – more than others, so when it tries to reduce its tax burden it should have a strong sense of priorities. Economist Charlie Colgan from the Muskie School at the University of Southern Maine likened looking at just the tax burden and trying to make cuts to “going into a supermarket and seeing only the prices – only gray boxes with nothing on them that says what’s inside” – and trying to shop.

. Most General Fund money is local money, according to Tax Committee Chairman Dick Woodbury, who estimates that 40 percent of the General Fund budget goes to K-12 education and another 20 percent goes to municipal revenue sharing. Rep. Woodbury is not suggesting local governments misspend the money, but that the choices citizens make at town meeting or through their town council have a direct effect on Maine’s tax burden. And it means that, when it comes time to cut funding, the cuts are likely to be local.

. The consensus from several speakers was that to lower the tax burden toward the national average takes more than just restraining increases; it means making real cuts to programs. Sen. Peggy Rotundo, chairman of the Legislature’s Appropriations Committee, said, “We’ve done a disservice making people think they can have it all.”

. Economists made the distinction between a government program’s outputs (the product of its activities) and its outcomes (the change resulting from the output). Charles Lawton of Planning Decisions offered the idea of assessing education performance on “accumulated test scores per dollar.” He was being provocative, but the point was to think more broadly about what Maine actually received for the money it put into services.

Maine Public Spending Research Group expects to produce a set of budget indicators based on the discussions this week, a guide to measure Maine’s progress in coming to terms with the state’s tax burden and, more important, a means to get beyond “Yes, but …” and “So what?” and into a debate over where Maine is and where it would like to go.