AUGUSTA — Two bills that lawmakers sent Wednesday to Gov. Paul LePage would extend $38 million in tax breaks to Maine businesses and add $15 million to local education funding.
Education leaders gave a tepid response, saying they were hoping for more financial help.
“While teachers and support staff across Maine appreciate lawmakers coming to a compromise to increase school funding by $15 million for the next school year, it’s simply not enough. The increased funding will still leave major funding gaps in school budgets across the state,” said Lois Kilby-Chesley, president of the statewide teachers union, the Maine Education Association.
The two proposals are part of a deal reached by legislative leaders and the governor’s office that is designed to end a stalemate over an extension of tax breaks favored by the business community, including the Maine State Chamber of Commerce. Democrats in the House of Representatives balked at a provision in the tax bill that would extend the Maine Capital Investment Program, which allows businesses to accelerate the depreciation of newly purchased business equipment from taxable income in the equipment’s first year of service.
Depreciation is a way of specifying how much of the value of an asset, such as a piece of business equipment, has been used up. Tax rules define how quickly a business can deduct the declining value of an asset over its useful life.
The program accounts for $28 million of the $38 million tax bill. Other changes include a teacher expense deduction and tax-free status for charitable donations taken from individual retirement accounts and bonus depreciation. Overall, the proposal incorporates into Maine’s tax code several changes in the federal code made in December, when Congress passed the Protecting Americans from Tax Hikes Act of 2015. The tax bill, if signed into law by the governor, would have a financial impact on about 100,000 Mainers and businesses.
The education bill is designed to address Democrats’ concerns that the Legislature would extend the tax breaks – and the equipment depreciation program of questionable efficacy – at a time when some school districts were projected to see significant decreases in local education aid. The districts included Portland, which received about $16.9 million for the current school year and was projected to receive $2.7 million less next year. Under the deal announced Wednesday, the district would lose $1.6 million instead.
“This is good news, but it’s still going to be painful in the city of Portland,” said Jeanne Crocker, acting superintendent of Portland schools. “I’m very appreciative of all the efforts by our legislators to find us some relief, but I am going to remain hopeful they are not finished.”
Democrats originally proposed a $23 million increase in local education funding. The compromise reduced the amount to $15 million and requires the formation of a commission to evaluate education spending, including whether the formula used to distribute state aid to school districts is effective and fair.
Several Democrats expressed frustration that lawmakers couldn’t agree on more education funding. House Majority Leader Jeff McCabe, D-Skowhegan, said many districts, including several rural ones, would still receive less school funding than they did last year. He urged his colleagues not to take a “victory lap.”
Passage of the two bills ends several weeks of public debate over a tax proposal, which was supported by business groups, and public education funding that has prompted the governor to question whether Maine is getting the most bang for its buck.
The bill moved in tandem Wednesday through the House of Representatives and Senate. The Democrat-controlled House passed the tax bill by 121-19 and the education bill by 131-8. The Republican-controlled Senate passed both bills by 33-0.
The governor said Tuesday in an interview with radio station WVOM in Bangor that he probably would support both bills.
Passage of the tax and education proposals come none too soon. March 15 is the deadline for filing corporate tax returns, and most school districts already are deep into budget season.
Saco Superintendent Dominic DePatsy agreed that the extra money won’t fill the gap in some districts. Saco’s proposed school budget, now before the City Council, calls for a 5.9 percent increase in the school portion of the tax rate, he said. Any extra funding will likely go toward lowering the tax increase.
“It was really shocking” when the district learned that its state funding was decreasing $1.3 million, DePatsy said. Under the compromise, Saco’s state funding will decrease by $1 million.
“It’s still hard,” he said.
Send questions/comments to the editors.
