February 2008 Archives

With all the hubbub surrounding LD 1932, which was the first attempt by the legislature to amend the troubled school district reorganization law, very little attention was paid to today's public hearings on two follow-up bills the Education Committee is developing. Known plainly as Committee Bill "A" and Committee Bill "B"at this point, these two bills contain a number of additional, mostly technical changes to the reorganization law.

While many of the proposed changes are pretty minor, there is cause for concern that both bills propose changes to the budget validation provision of the reorganization law, which gives every citizen in Maine the right to vote on their school budget.

Under current law, if the proposed school budget is to exceed the state-calculated Essential Programs and Services budget limit, voters are to be asked two questions on the ballot. The first question asks voters to approve the budget itself, the second asks voters to confirm that they support the budget even though it exceeds the EPS target. Committee bill "A" would eliminate that second question, essentially removing from the ballot any reference to the EPS target. This proposed change comes only days after a State Planning Office report was released which found that 82% of school districts were over their EPS target.

Committee bill "B" is far worse. It would allow two exceptions to the current mandate that all school districts put their school budgets out to referendum. The first group of towns are those with charters that give "legislative" power to a city council. They would be allowed to use whatever process they have in their charter. The Maine Municipal Association puts the number of towns with this system at only 30, but those 30 are home to about 35% of the state's population. The other exception would be for those districts whose proposed school budgets are below 5% over EPS, which for 2006-2007 would be more than 80 school units according to the Department of Education. Just like that, the Committee intends take away from hundreds of thousands of Mainers the right to vote on their school budget in the privacy of the voting booth. Unbelievable.

The Education Committee has yet to take any action on these bills, but there is little reason to hope that these disenfranchising provisions will be amended out of the bills. The committee just does not seem to have any interest in having people vote on their school budgets, and that goes for legislators on both sides of the aisle. It is simply, and amazingly, a non-issue for them.

One hopes the full legislature will be more interested in guaranteeing that ALL Maine people retain the right to a school budget referendum vote. It is a right they currently have under law, but perhaps not for long...

Milk Pool and Other Milk Fees

The next installment of the "Hidden Tax/Fee of the Week" is available on the MHPC website.

Total Hidden Taxes/Fees to Date: 284

The other day I was looking over various labor data in Maine when I noticed divergent trends in 2007 for Maine versus New Hampshire. In particular, Maine's number of unemployed has been trending up in 2007 from less than 32,000 in January, 2007 to over 36,000 by December, 2007. On the other hand, New Hampshire's unemployed has been trending downward from just under 28,000 in January, 2007 to over 26,000 in December, 2007. With a national recession looming, Maine's economy has already been losing steam while New Hampshire's economy has not.

In addition, a look at the total civilian labor force yields clues into the long-term sustainability of our two economies. In 2007, Maine's labor force has been shrinking--starting at over 715,000 in January, 2007 and ending below 710,000 in December 2007. This may be an early warning of things to come due to Maine's rapidly aging workforce. Again, New Hampshire has been trending opposite to Maine's with their labor force growing from just under 745,000 in January, 2007 to just under 750,000 in December, 2007. Beyond the trend itself, note that on average, New Hampshire's labor force is bigger by 30,000 to 40,000 people despite having nearly identical populations.

Click "continue reading" to see graphs.

An article today in the Kennebec Journal debates the merits of coupling with the new federal law changes which includes bonus depreciation. The short answer to the question is: YES, Maine should adopt bonus depreciation. In fact, we should go one step further and enact "immediate expensing."

Why? Depreciation is an artifact of the tax code that only tax accountants/lawyers could love. From an economic standpoint, depreciation is an unnecessary complication that has no useful economic purpose. In fact, the article makes a untrue comment when it says, "There are different ways to calculate depreciation, but the simplest is to divide the cost of the equipment by its expected life span." In fact, the best and simplest way to depreciate equipment is through immediate expensing. In other words, a business can write-off, for tax purposes, all investment in the year it was purchased.

Numerous studies have been written about the economic virtues of immediate expensing. Here is a study written by Dr. Arthur Hall on the benefits of expensing to the Kansas economy. Dr. Hall is the Executive Director for the Center for Applied Economics at the University of Kansas. Below is the introduction of his paper--it's too bad we can not say the same things about Maine's economy:

"Kansas is on a roll when it comes to good tax policy. One simple, inexpensive step can sustain the momentum and produce a competitive leap in terms of bang for the buck: Permit all businesses to take an immediate income tax write-off for new investments made in Kansas. This step--called "expensing"--would complement the recent competitive reforms related to property and franchise taxation--and further distinguish Kansas as a go-to destination for capital investment, a key driver of high-wage jobs. As a bonus, expensing would make taxes fairer, because it results in equal tax treatment among businesses of all types and sizes."

"The existence of an income tax makes the Kansas government a de facto silent partner in every Kansas business. In light of this partnership, the appropriate tax policy question is this: Does the government wan to act like a partner that invests in the business or a partner that draws cash out of the business whenever possible?"

"Kansas income tax law, because it operates as an extension of the U.S. income tax law, makes the Kansas government act like a cash-hungry partner rather than an investment-driven partner. Expensing would reverse the situation and turn the government into an investment-driven partner--for the economic benefit of all Kansans."

And FYI, Dr. Hall's study was written in a state with a tax burden that is 17.4 percent lower than Maine's--10.76 percent versus 13.03 percent in FY 2005 (Census Bureau, Bureau of Economic Analysis).

It’s beginning to look a lot like last year in the halls of the Statehouse as legislators wrestle with various amendments to the controversial school district reorganization law. Observers of the development and passage of the law last Session will see the similarities immediately.

Last year, The Education Committee was unable to come to any kind of consensus on a consolidation plan and thus put forward a whole series of underwhelming proposals. As a reward for its work, the committee then had the consolidation bill taken out of its hands and turned over to a subcommittee of the Appropriations Committee. This group developed its own plan, which was then handed over to the legislative leadership. The leadership proceeded to rework the bill in back offices until the final plan, which has been almost universally regarded as irreparably flawed, was put out for vote of the entire legislature. Strangely, it passed.

Now, a year later, this same legislature is racing to fix the troubled law, and history seems to be repeating itself. The Education Committee was again given the task of reworking the law, and has so far put forward two versions of one bill, LD 1932, and is developing two other bills to mend the law as well. Not content with either version of LD 1932, Education Committee member and Senate Majority Leader Libby Mitchell put forward yet a third version of the bill, and on Tuesday succeeded in attaching it to the version of LD 1932 supported by the majority of the Committee.

In the process of the bill's passage in the Senate, though, opponents began finding problems with it, sending supporters into back offices to rework it once more. In the meantime, the Education Commissioner and her staff materialized in the hallways on Thursday looking to turn Senators against the Mitchell amendment, which the Administration opposes.

The bill hasn't even made it to the House of Representatives yet, where more proposed amendments no doubt await it. 18 amendments to the original LD 1932 have been drafted already.

Blame for this mess could be spread far and wide, but a good part of it has to be that from the start, nobody involved in this process, from the Governor to the Education Department to the legislative leadership, has been able to develop either a cohesive vision of what a world of large regional school districts would look like, or a compelling case that such a world would be better for Maine schools and students than what we have today. In the absence of such a driving vision, the entire process is now mired in election-year politics, making it likely that the end result will be little more pleasing to the people of Maine than what this same troubled process produced a year ago.

To top it all off, the legislature has next week off, meaning that school and community leaders across Maine will have to wait yet another week to see what, of anything, the legislature will do next.

Followers of school reorganization developments may remember that last fall we expressed a great deal of concern that school choice was lost for families in the four School Union 47 towns that voted to join with Bath to form the state's first Regional School Unit.

Now one of the towns that joined the RSU, Arrowsic, is in something of a bind because is used to send some of its students to the school in Georgetown, but is evidently being forbidden from continuing to do so by the RSU board.

One of the provisions of the agreement to form the Bath-area RSU was that students there would no longer be allowed a choice to attend schools outside the RSU. Georgetown voted against joining the RSU, is therefore not a part of it, and so Arrowsic parents may no longer choose to send their students there.

According to today's Brunswick Times Record, efforts were evidently being made in Augusta to amend the law governing the Bath-area RSU so that Arrowsic families might still be allowed to choose the school in Georgetown, but the RSU board voted unanimously "not to endorse" the proposed change.

Indeed, the Bath RSU board is so adamant that school choice be eliminated that the bill they put forward, LD 2028, contains the following provision, which would limit school choice in any school district that joins the Bath RSU in the future:

Notwithstanding any other provision of law, the [RSU], in order to offer consistent options to all of its students, may opt to limit school choice for students of municipalities that join the [RSU] after its initial date of consolidation, even if the municipality offered choice prior to the municipality's joining the [RSU].

In short, they want to take choice away from districts that are not even part of their RSU yet!

One hopes a choice-supporting legislator will draft an amendment to LD 2028 ensuring that ALL students in RSU 1 have a choice of schools, as many of them did before last fall's vote.

At long last, the state Senate took up LD 1932 last night, the first bill seeking to amend the controversial school district consolidation law passed last year. The majority report of the Education Committee was adopted, as well as Senator Mitchell's amendment (put forward by MDI's own Sen. Damon) which would allow for the creation of "super" school unions as an alternative to the fully consolidated Regional School Units in the current law.

Brian Hubbell, the MDI school board member who maintains the comprehensive and indispensable mdischools.net website offers a detailed account of last night's actions in the Senate.

Supporters of accountability and transparency in government should be very concerned that one of the provisions of the amendments adopted last night postpones the budget validation process mandate for a year. I recently highlighted the successes of this school budget approval process in a new report. Under current law, every school district is to use the budget validation process this year, allowing all Maine voters to approve their school budgets through referendum vote. If LD 1932 passes as it was adopted by the Senate last night, it would be another year before the process goes into effect, no doubt costing taxpayers millions in lost property tax relief from school budget savings never realized.

Let's hope the House of Representatives does a better job when the bill gets to them.

I will begin a new series on the MHPC blog called "Maine versus New Hampshire." The purpose of the series is to highlight similarities and differences between Maine and our chief economic competitor--New Hampshire. For better or worse, Maine's only domestic border is with New Hampshire. The importance of which was highlighted in our recent report on ME-NH cross-border shopping.

The first post will start with the basics by simply reporting the differences in state revenues and expenditures between the two states based on data from the Census Bureau. Here are some highlights from the state-level data (click "continue reading" to see Table):
* Maine collects $1,509,761,000 more in taxes.
* Maine spends $1,866,735,000 more.
* Maine spends $1,090,609,000 more on public welfare.
* Maine spends $340,648,000 more in health.
* Maine spends $86,658,000 more in government administration.
* New Hampshire spends more on Education ($22,213,000), Hospitals ($1,090,000) and Parks and Recreation (2,119,000).
* New Hampshire has $2,432,942,000 more in debt and spends an additional $115,633,000 in interest.

Finally, when comparing these numbers, keep in mind that New Hampshire's personal income is $9,942,453,000 larger than Maine's.

I apologize for the long hiatus of the "Hidden Tax/Fee of the Week." Thanks to our new intern, Bill Kay, the hiatus is over. The next installment of the "Hidden Tax/Fee of the Week" is now available on the MHPC website.

Total Hidden Taxes/Fees to Date: 283

Note: The total has been revised upwards thanks to new taxes and fees within the previously covered categories.

While the legislature has been struggling to rework the school district reorganization law, towns and cities across Maine have been watching carefully to see if any changes will be made to the new school budget approval procedure the law contains. Known as the "budget validation process," it requires that school budgets be presented at a public meeting, and, if approved there, then go on to a referendum vote within 10 days. If the voters turn down the budget at the referendum, the process repeats itself.

This procedure has generated opposition from some of the cities, who say they face great costs to do a referendum vote. Many small towns, who already use a town meeting to pass the school budget and consider that to be democracy enough, have voiced frustration as well.

An example of the latter is Southport, which, according to published reports, has decided to disregard the law and pass the school budget using the town meeting process they've used for generations:

While many Lincoln County towns wince at the idea of an up or down vote on the total school budget figure this year, Southport will go with its past history of voting as it always has since 1842 - at March town meeting.

"We have never had a public hearing (on the school budget) nor do we intend to," said School Union 49 chair and local school board member Bruce White. "We've always done it in our town meeting& the town meeting being the purest form of democracy."

It will be interesting to see the state's response to this act of civil disobedience. The law makes very clear that "school administrative district budgets developed after January 1, 2008 must conform to the format and referendum procedures" laid out in the law. Is the school budget legally valid if the validation process is not used? Can a town government simply vote to take away a right accorded its citizens under the law?

Stay tuned...

Supporters of school choice got a boost this past week when President Bush outlined his "Pell Grants for Kids" program in the State of the Union speech. The concept is a simple one. Today, college students across the nation receive federal Pell grants to help offset college costs. As the Wall Street Journal pointed out, this popular program, which handed out $14 billion to over 5 million college students last year, is essentially a voucher system. The money goes to the student to spend at the college he or she selects, public or private.

In his speech, Bush proposed to create a similar "Pell Grants for Kids" program, to help families in failing public schools pay for private school as an alternative. The $300 million dollar prices tag, National Review calculates, would make $5000 scholarships available to 60,000 kids. They would be allowed to use the funds to attend private or faith-based schools of their choice.

Funding scholarships is slowly becoming the favored way to advance school choice options across the nation, especially as public school voucher programs have struggled to even get off the ground. Utah's ambitious voucher program went down in flames at the polls last November after withering opposition from teacher unions, including the Maine Education Association. Privately funded scholarships are being seen as a way to help advance school choice without redirecting funds away from the public school monopoly. If a vibrant private school marketplace can be built with scholarships, the argument for school vouchers gets stronger every year.

No doubt the President's proposal will face enormous opposition, but it is good to hear the case being made to provide alternatives to the nation's failing public schools, especially for those families that cannot afford either private school tuition or the cost of moving to a better school district. Families that can do either of those two things, of course, already have school choice.