Speakers back Baldacci budget at conference Property-tax concerns stressed

AUGUSTA – Three days after the governor released his 2008-2009 budget, state officials, legislators, business people, educators, health care providers and others gathered to react to the fiscal recommendations and suggest amendments.

Most speakers at the Maine Center for Economic Policy’s Annual State Tax and Budget Conference at the Augusta Civic Center on Monday endorsed Gov. John Baldacci’s budget. Several people, including the governor, noted that the budget is largely based on observations and suggestions put forth in the Brookings Report, an analysis of the state’s economy published in October by Washington, D.C., think tank The Brookings Institution.

Keynote speaker Iris Lav, deputy director of another Washington, D.C.-based organization, the Center on Budget and Policy Priorities, said she agrees with most of the governor’s decisions. Lav said voter concerns about property taxes must be addressed and she offered recommendations for government spending that would support economic development.

“No state ever cut its way to prosperity,” Lav said. “Investment is key.”

Lav said Maine’s 2004 state and local taxes per person were 10th highest in the country, but lower than Connecticut, Massachusetts and Rhode Island and only $100 higher than Vermont.

“The property tax is relatively high, sixth highest in the country, and there are few other revenue sources for local governments,” Lav said.

Maine’s assessment practices are abysmal, Lav said, and while municipalities are required to maintain assessments at no less than 70 percent of the market, many do not. There is no enforceable requirement for periodic assessment, nor is there a consistent, valid method for updating valuation between assessments, Lav said.

“Poor assessment and valuation practices lead to a general perception that the property tax is unfair,” she said.

Lav recommended that assessments be performed at the county or state level at 100 percent market value every six or seven years. She also said valuations should be updated annually.

The assessment cap recommended by the governor would “lock in inequities” that exist between properties which have been assessed with irregular standards, Lav said. Instead, she recommended keeping the state’s current “circuit breaker” program, which relates property tax payment to income. Lave said this is the best type of property tax relief because it aids those overburdened by the tax.

Maine’s current circuit breaker program is one of the most generous in the country, Lav said.

To stimulate economic activity, she stressed investment in higher education and praised Baldacci’s $28 million budget allotment for the University of Maine System, community colleges and Maine Maritime Academy.

“Quality higher education is often at the top of business leaders’ lists of what makes a good business climate,” Lav said.

She also approved the governor’s choices to invest in MaineCare, the Maine Technology Institute and the Maine Economic Improvement Fund.

Lav cautioned against giving for-profit businesses tax breaks as a means of promoting growth. She said this was ineffective, presenting statistics that showed that while 10 Maine companies received a total of $90 million in tax reductions in 2004, those companies saw an overall loss of 769 jobs. Only one, Katahdin Paper, used the money to hire new employees, Lav said.

Rep. Steve Hanley, D-Gardiner, a member of the audience, said he found Lav’s presentation very informative, but remains concerned about the governor’s budget.

“I see a 4.5 percent increase in spending. I’m not happy,” Hanley said. “What I didn’t hear was a reduction in taxes. We’ve got a lot of work ahead of us.”