What’s in the governor’s budget? MFPC’s review
The 127th Legislature is launched with the usual fanfare. Legislators brought forward 1,514 new ideas (and some old) in bill titles for legislative review.
The MFPC team will work through the bills that I highlight for review with our recently activated policy committee every Friday morning. This process serves us well as we seek the collective wisdom of the membership and a wide variety of topics. As the session progresses you will be able to track our progress on legislation of interest.
Please continue to reach out to your newly elected legislators because the relationships you build as a constituent are tremendously meaningful and help verify the messages they hear from MFPC. (Who are your legislators? It’s a great time to find out.)
Gov. LePage continues to keep forestry issues in the forefront of his vision for Maine. In his inaugural address he mentioned the threat of the spruce budworm and the need to manage our forest resources. Reflected in his budget is a keen interest in the mission of the Maine Forest Service and the need to attract investment in our industry and state. But the devil is in the details, so I’ll be trying to guide some of the budget proposals in a better direction.
Responses to the governor’s budget have been quite varied.
- Bangor Daily News: “The word of the day in the State House on Friday was “bold” as Paul LePage presented a biennial budget bill that surprised Democrats for its compassion and appeared to create concern among Republicans because of a range of tax increases it proposes.”
- Senate President Mike Thibodeau to WMTW: “If we were simply talking about raising the sales tax and there was no tax relief someplace else, of course we’d be concerned, but we’ll look at the whole proposal, we’ll see how it affects Maine’s economy – whether or not we think this will make Maine a stronger economy … a better place for people to live and, if it does, then we’ll be on board.”
- Portland Press Herald editorial column: “In his budget proposal released last Friday, the governor went far beyond the tax cuts and spending reductions that most people were expecting. Instead, he proposed revolutionary change to a government that usually measures progress in increments.”
- House Speaker Mark Eves (Associated Press): “I have said that if it’s going to happen it’s going to take leadership from the governor and both parties trusting one another. I think we’re off to a good start and it will depend on how things go from here and what the other details of the budget are.”
An overview of the budget can be found on the following link.
Tax reform in the budget has some good provisions for most of the members who are small businesses (loggers, sawmill owners, landowners). Attorney Jonathan Block from Pierce Atwood provides me with expert advice in analyzing membership implications. The elimination of the Maine estate tax after January 1, 2017, and interim adoption of the federal exclusion rate will help many of our forestry business owners think twice before retiring to states without an inheritance tax. In capital-intensive businesses the value of land and equipment easily approaches several millions of dollars.
Income tax rates are reduced across all brackets. The current rate structure consists of 0%, 6.5% and 7.95% taxable income brackets. From 2016 to 2019, the rates would be gradually adjusted to 0%, 5.75%, 6.5% and 5.75%. Reductions occur in every income category, helping employees and businesses filing as pass-through entities/ sole proprietorships (many loggers and truckers and consulting foresters for example.
The Corporate income tax applied to many of our medium and large sized members is budgeted to be reduced over five years moving from the current tax rate brackets of 3.5%, 7.93%, 8.33% and 8.93% to rates of 3.5% and 6.75% in 2021.
The Business Equipment Tax Reimbursement (BETR) program is eliminated and transitions property eligible for the BETR program into the Business Equipment Tax Exemption (BETE) program over a four-year period. BETR would be funded at the 90% level until its elimination. This proposal was in previous budgets and was detrimental to some large manufacturing members. We will be working to identify these instances. It’s important to understand that business equipment tax exemptions are important to keep us competitive with other states and countries with a forest products economy.
Municipal revenue sharing would be eliminated in the second year of the budget. The lack of revenue shared with municipalities would have to be offset by increased local property taxes, reduced spending or a combination of both. Higher property taxes would have a major negative impact on capital intensive businesses.
Sales and Use Tax increases are funded by expanding the tax base to include things such as personal property services; installation and repair services; recreation and amusement services. An important exemption would be created for sales to businesses of professional services, personal property services, and installation, repair and maintenance services.
Restructuring the Department of Agriculture Conservation and Forestry
Two issues are converging in the proposed restructuring of the ACF Department: 1.) Restructuring the Forest Ranger Division as a result of past session debates about their future mission, and 2.) Moving public land functions out of the current Bureau of Parks and Public Lands into the Maine Forest Service. Commissioner Whitcomb did a good job of providing an overview of these changes to the Appropriations Committee and there will be further discussions in the ACF committee as it reviews this portion of the budget.
The recent budget changes to the forest ranger ranks are a continuation of the debate brought on in the 126th Legislature to provide all rangers with a firearm. Tom Doak, executive director of the Small Woodland Owners Association of Maine (SWOAM) and I persevered in our concerns that the rangers are at a crossroads in defining their future mission; whether they should increase their role in public safety and enforcement, or continue enhancing their role in resource protection (MPFC’s position). Despite our differences on arming, the importance of the contribution rangers make within the Maine Forest Service has never been questioned. After participating in a Governor’s task force and listening to concerns about ranger safety, we introduced an amendment to LD 297 (S-423), which created several new positions of conservation officers, who would be fully trained in firearm use and law enforcement. The enforcement authority of the existing rangers was limited to civil (not criminal) violations, their powers of arrest were eliminated and their duties expanded to include providing support to units within the bureau responsible for forest health and insect disease control. This amendment was defeated by the rangers, but a subsequent veto by Gov. LePage killed LD 297.
In the governor’s budget the concepts in our amendment are replicated with the distinction that six natural resource enforcement officer (NREO) positions would be created with one supervisor and rangers would not have any law enforcement powers. Work force reductions are contained in the proposal, which we are still evaluating since some new positions are created. Rangers play a significant role in assisting in field inspections and investigations (e.g. Forest Practices Act, shoreland zoning, and timber trespass and timber theft) as support to enforcement foresters and future NREOs. We also believe positions could be shifted into the Forest Management and Policy and Resource Protection divisions to better align resources to the new challenges in Maine’s forests. We’ll work with legislators and the administration and keep you posted.
Restructuring ACF bureaus
In the Governor’s budget there is a proposed restructuring of bureaus, triggered by moving public lands out of the Bureau of Parks and Lands and into the Bureau of Forestry. I think this has some merit on the basis of a shared forest management mission and the structure is similar to other states despite our comparatively low acreage of public lands. Certainly land management, inspection, protection and enforcement activities are all related and can be appropriately housed in the Maine Forest Service (MFS). The important balance of public values on these lands can also be maintained. However, the organizational changes made in the budget to accommodate public lands into the MFS are problematic. The restructuring of divisions and resulting staff reassignments in the budget are currently confusing to me and appear to erode the effectiveness of the Bureau. I’ll work with the administration to help clear up these concerns.
I was concerned to find a language modifying the Tree Growth tax law in the budget! I’m assured that the benefits of the program and its ability to help landowners grow trees is appreciated and supported by the administration, but they believe compliance needs to be assured, and those abusing the current use taxation option need to be identified and dealt with. This concern also arose in the 125th Legislature where then Senate President Kevin Raye introduced LD 1470 An Act to Ensure Harvesting of Timber on Land Taxed Under the Maine Tree Growth Tax Law. This bill required the MFS to sample and report findings as a result of their audit to the Legislature by March 1, 2014. The Tree growth tax law audit 2014 was delivered to the taxation committee and identified some recommendations.
However the overall finding was that “landowners enrolled in the Tree Growth Tax program appear to be doing more than their fair share of harvesting and keeping up their end of the bargain.”
Sampling intensity of waterfront properties fell short of the goal and the MFS recommended a methodology “to better access compliance issues on properties with waterfront and oceanfront features, as these properties appear to be the major cause of concern for municipalities.”
While some of the proposed changes in the budget to the Tree Growth program are worth discussing, others are heavy-handed and will serve to discourage enrollment in the program and therefore discourage long-term forest stewardship. A focus on specifically auditing coastal properties for a set time period is a good idea.