From health care to tax reform, the Legislature confronted issues that have haunted Maine’s economy, earning high marks from business leaders
AUGUSTA – By last fall, Kellie Murdock was out of patience.
Health insurance costs for small businesses were out of control. Her employees couldn’t afford it, and her growing company in Turner couldn’t pick up more of the tab. Murdock Country Creations simply could not offer an insurance plan.
“We desperately want those options,” Murdock said at a meeting of business leaders. “But it just costs too much.”
Phones at the Maine State Chamber of Commerce lit up with the same complaint. And there were other needs that couldn’t be pushed back any longer.
Businesses called for more public investment in research and development. Tax reform to help Maine companies compete in the global marketplace. A community college system to keep young talent in the state.
On behalf of its 1,200 members, the chamber sent out a strong message to legislators before the session started in January.
Lift some weights from the economy, chamber staff urged, or keep watching it sink.
Six months and a few hundred bills later, the session has adjourned and the business community is catching its breath. While some concerns remain, chamber president Dana Connors says lawmakers answered the call.
“I would give the session high marks,” Connors said last week. “A very strong commitment was made to improve our economy. There is a lot that we should feel positive about.”
There is Dirigo Health, the state’s controversial and ambitious plan to insure more residents and hold down health-care costs. There are Pine Tree Zones to spur targeted investment in exchange for tax incentives, including one zone in Androscoggin County. There is a broad push to eliminate the state tax on business equipment and machinery.
Voters earlier this month approved a $60 million bond package for economic development, with an emphasis on medical research, technology in education and affordable housing.
And lawmakers approved the Community College system, though it may take another bond package to find the funding. Building upon the current technical college system, the state hopes to expand courses, improve facilities and boost enrollment by 4,000 in coming years.
All of this was accomplished, Connors noted, without tax increases, and in the shadow of a $1 billion budget gap.
“The budget normally dominates the first session,” he said. “Any one of these issues could have consumed two years. They are issues that have been haunting us, and now they are on the front burner.”
Two broad areas – health care and tax reform – are expected to have the biggest impact on the future of business in Maine.
Planning for health
After much wrangling, Gov. John Baldacci’s Dirigo Health plan earned final legislative approval on June 13, in the session’s last hours.
It was not a sure thing. Lawmakers, social organizations, business interests, health-care representatives and other parties had hammered away at the plan for months. In the end, most agreed: Dirigo Health was far more agreeable than the alternative – doing nothing at all.
The bill seeks to help Maine residents enroll in health coverage, through private insurers or MaineCare, previously the state’s Medicaid program. A quasi-public agency will run Dirigo Health, with oversight from a board appointed by the governor.
The hope is to get 180,000 uninsured Mainers covered by the end of this decade. The goal is to also keep health-care and insurance costs under control, through new rules for providers and insurers; the board would work continuously with the industry. Dirigo Health is expected to take effect in July 2004.
Backers say the program would allow more businesses to tap into health coverage. That could not come soon enough for some.
“Cost increases over the past five years have been astronomical,” said Chip Morrison, president of the Androscoggin County Chamber of Commerce.
Those hikes have forced many companies to drop insurance plans, and they make it practically impossible for small start-up firms, considered the mainstays of the state’s economy. Of the 50,000 new jobs created in Maine between 1990 and 2001, about 40,000 were in small businesses, according to the National Federation of Independent Business.
Some groups have serious doubts about Dirigo Health.
“The fear is this will be used as a roadblock to making changes in the private insurance market,” said David Clough, longtime state director for NFIB. He’s concerned that employees will be asked to pay 55 or 60 percent of monthly premiums for Dirigo Health. This could shut businesses out, Clough said.
“Our members had mixed feelings,” he said. “It does not appear to offer affordable health insurance for businesses that can’t afford it. It might have some attraction for those that already offer it.”
Still, Clough and others are waiting to see how the program works, once a board is appointed.
“It remains to be seen what will happen in the real world,” he said, “and what actions the Legislature will need to consider.”
Connors asked chamber members for patience, saying Dirigo Health brings maximum opportunity with minimal risk.
“Yes, questions remain. There is doubt, but this state has stepped up,” he said. “This could result in a major competitive advantage for our businesses. You have until 2005 to test the program, to determine what the savings may be, and you’ve got tremendous oversight.
“Leadership sometimes means you don’t have every question answered,” Connors added. “The proposal from the governor needs to have its day in the marketplace.”
Confronting taxes
Beyond the budget and health care, tax reform was among the most-discussed topics.
Unable to reach consensus during the session, lawmakers hope to adopt a plan at a June 27 special session.
Among the pieces under consideration are a local option sales tax, how to alleviate the property tax burden, and whether regions should consolidate services to rein in spending.
“It’s a huge issue, and extremely complicated,” Connors said.
Baldacci has led the push to eliminate the tax on business equipment and machinery. Lawmakers have essentially played a shell game with that tax, accepting payments from companies but later reimbursing them for 100 percent of the bill.
That refund program, called Business Equipment Tax Reimbursement (BETR), has been an annual target by groups who say it gives a free ride to big business. Some call for getting rid of the tax itself, which would make BETR obsolete. But towns depend on the tax revenue, and there is no solid plan for replacing it.
In any case, elimination of the tax could mean good news for the business community.Companies dependent on new technology would not have to worry about the tax or the future of the BETR program.
“Having a tax on the machinery puts us at a competitive disadvantage,” said Christopher Pierce, president of Dingley Press in Lisbon. Without the tax refund, Pierce’s company might not have been able to expand twice and boost its workforce to 440 full-time workers.
“If we can’t expand,” Pierce said, “then it ultimately hurts the people in Maine.”
Pierce and others will have an eye on the special session, and beyond, to the start of the next session in January.
Comments are no longer available on this story