The state must close a $733 million budget gap in the two-year budget currently before the Legislature. One proposal from Gov. Baldacci would raise $250 million now. But it would mean signing away most lottery revenue – up to $40 million a year – for the next 10 years to investors willing to front the state money.
To be clear, that means $250 million in hand now rather than $400 million paid over the next decade.
The money would allow the governor to follow through on promises of reducing property taxes and increasing state funding for education without raising broad-based taxes. But the long-term implications are troubling.
While the $250 million would help resolve a serious and immediate problem, the full financial impact would be felt for a decade, as each year the governor and Legislature would have to make do without the lottery money. Over 10 years, it could amount to $150 million in lost revenue.
The new money would be a one-time thing. It’s the equivalent of taking out a loan for operating costs. Any business owner can confirm the hazards of such a move.
Several supporters of the plan liken it to the privatization of the state’s liquor sales, which Baldacci pushed through in 2003. But the state shouldn’t have been in the liquor business to begin with. It was a relic of an era of Prohibition and blue laws. Modern governments really have no business selling booze.
Gambling is different. If state lawmakers and the governor were interested in privatizing gambling, they could have supported the effort to build a large casino in southern Maine. Instead, Baldacci and many of his political allies opposed the idea.
The argument has been made that the money would be a good investment for the state and would create a positive economic impact by allowing the tax burden to be lowered while providing more money to local schools. But investments generally last more than two years, and if they are successful, you have more at the end than you started with.
What happens in 2007 when the state is trying to balance the books and can’t sell off its lottery revenue for instant gratification? The $250 million will be gone.
We can expect that growth will have increased money flowing to the state – barring a recession or some unforeseen disaster – but we can also expect that there will be greater demands on state resources.
Maine’s problem is that revenue does not match expenditures, a problem made worse by voter-mandated spending enacted by referendum.
Selling off future revenue would only be a temporary patch.
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