State Treasurer Bruce Poliquin visited the region last month to attend the Maine Potato Board’s annual Industry Dinner in Fort Fairfield, but before sitting down to dine with The County’s growers, he sat down with staff of the Aroostook Republican to discuss ways that the current administration is working to help northern Maine as well as the rest of the state.
Paying off half of the state’s $500 million hospital debt, setting a course of action to overcome a $4.1 billion shortfall in pension debt, allowing the creation of new Maine charter schools, implementing welfare reform, passing the largest tax cut in the history of Maine and altering the state’s inheritance tax — Poliquin enthusiastically explained how the current administration’s endeavors will positively affect the state’s taxpayers.
With equal energy, he also described ideas that members of Governor Paul LePage’s administration are passionately pursuing, like reform of the Land Use Regulation Commission (LURC) and attempting to reduce energy costs throughout the state.
Poliquin explained that the new leaders in Augusta, mostly from the private sector, are looking to help strengthen local businesses in order to help the state as a whole.
“The problem we have in the state is that the folks who created the rules have created such a complicated and expensive place to live and do business that we have a shrinking private sector that isn’t generating the tax revenue we need to pay our tax bills from the public sector — it’s completely backwards,” he said. “So all these pieces are all part of a very well thought-out strategy to get the pieces in place to make sure we create a business-friendly climate so we can generate more jobs — private sector jobs — such that we can keep our kids here, and such that we can generate the future revenue we need to pay our bills.”
Seemingly since the LePage administration signaled their intentions to turn down the road toward economic stability, the drive has been pretty rough.
And that’s not news to Poliquin.
“This is a very painful process we’re going through and part of it is [identifying] what we can afford,” he said. “We couldn’t afford our pension program down the road, so we reformed that. We needed to get the expense of doing business in the state down, and we did that through the tax cut. We can no longer afford the welfare programs we have here, so we reformed those,” he added.
These reforms and changes have been implemented throughout the state.
“Whether you come from Washington County, York County, Oxford County — it’s one Maine,” the treasurer said.
Welfare reform
By reforming the welfare system, Poliquin believe the state will have more money for those who really need it. As he described, most other states use a benchmark of 133 percent poverty level, meaning if one’s income falls below 133 percent, they quality for any number of state-aid programs. With poverty level at about $20,000 a year for a family of four, that would mean a family would require an income less that about $26,000 to qualify for state aid.
Maine is currently a 200 percent state; to qualify for many social programs in Maine, a family that earns less than 200 percent the poverty level, roughly $40,000, qualifies for taxpayer-funded assistance.
Poliquin explained that the median household income for the state — two kids and two able-bodied working adults — is approximately $45,000.
What that means is that if a husband and a wife are killing themselves working at a convenient store or a car wash, in the agricultural community or in the forest products industry, their taxes are paying for the health care of a family that makes $4,000 or $5,000 less; that’s not fair,” Poliquin said.
“Mainers are very big hearted and we want to help our neighbors,” he said. “At the same time, we’re out of money and as a state, we can’t afford it. Those who are able to take care of themselves have to do so,” he added.
Poliquin provided a couple of approximate figures to highlight the need for reform:
• In 2002, there were approximately 50,000 Mainers on food stamps. Today, there are 132,000.
• In 2000, there were 154,000 people on Medicaid. Today, there are 342,000.
“You know Gov. LePage’s story — he’s personally committed to changing this cultural dependency in the state of Maine, and this is in all 16 counties,” he said.
Included in the welfare reform package is a five-year lifetime limit in some of the state’s assistance programs; there’s also a waiting period added to some of the programs as well.
There will also be drug tests for individuals enrolled in some state programs who’ve had drug problems in the past.
“We will be able to terminate welfare benefits if there are serious violations, and we will do it,” Poliquin said.
The administration has also created a fraud taskforce at the Department of Health and Human Services, according to the treasurer, which will be responsible for investigating welfare fraud (with assistance from the Attorney General’s office).
“This is a whole different attitude how we approach this problem and to transform the state into, frankly, what it used to be — which is one of self reliance, personal responsibility and independence instead of creating a culture of dependency with no consequences,” Poliquin said.
Pension reform
When the LePage administration came into office, they were met with approximately $4.1 billion shortfall in pension debt, or the benefits that were promised to public school teachers and state employees for their retirement. According to Poliquin, the origin for this shortfall began many years ago when the retirement benefits were promised and not fiscally allocated.
“This compounded for a long period of time and then in 2008, the investment pool that we have to help us pay for these pensions collapsed in the stock market, so all of a sudden we had $4.1 billion less than we owed,” he said.
According to the treasurer, the Maine State Constitutions mandates the administration to pay off that debt by 2028 — just 17 years from now.
“Some folks have kicked the can down the street; we haven’t done that,” Poliquin said. “We’ve looked it in the eye and said ‘how are we going to address this?’ We’ve made some adjustments to the plan and what it means is that the folks who are in the retirement plan — our teachers and our state workers — are still receiving their pension checks, but what we’ve done is made adjustments such that their benefits will not grow as fast as they had in the past.”
In the last budget passed, $1.7 billion of that pension debt was eliminated, which means big things for the state and The County.
“We are now spending $150 million to $275 million less per year for the next 17 years [to eliminate that debt],” Poliquin said. “That means the taxpayers in The County and throughout the state do not have those tax dollars flowing to pay off debt anymore.”
Pension reform headlines have topped major publications statewide this past spring, getting the reform passed was nothing less than a battle.
“The teachers, state workers and troopers — they didn’t create this problem. When they were hired they were promised these pension benefits,” Poliquin said. “The problem is that the people who created these benefits were no longer there,” he said, adding that it’s real easy for career politicians to promise something they won’t have to pay for.
“It was a very painful issue, don’t get me wrong,” he added, “ but we’re now in positions of responsibility in Augusta, so we have to deal with it and we did; we did not cut their retirement benefits, what we did was limit the growth of future benefits.”
Tax cuts
The LePage administration passed the largest tax cut in the history of the state at $150 million, according to Poliquin, and some of the rhetoric surrounding the issue was that the tax cuts were only for the rich.
“That’s not the case,” Poliquin said, backing up his statement with a couple of numbers. “There are 460,000 of our fellow Mainers who will be receiving tax cuts, and there are only about 1.3 million people in the state. And about 650,000 file a tax return, so about two thirds of all our tax filers will be getting a tax cut, including taxpayers in The County.”
The rational behind the tax cut being that the more money Mainer’s are able to keep in their paycheck, the more they’re able to spend where they want to.
“That means new economic activity and new tax revenue so that we [the state] can pay off our bills,” Poliquin explained.
In addition to the tax cut, 70,000 Mainers who are the lowest income earners in the state will receive a $0 tax bill from the state. There’s also a tax break included in the tax reform for businesses that buy equipment.
“So if you’re a farmer who buys equipment for your business, you get a tax break for buying that new machinery that helps create new jobs and more production,” Poliquin explained.
The fourth tax-factor that Poliquin seemed excited about was reform to the inheritance tax, colloquially called the “death tax.”
Prior to passing the new tax reform package, only the first $1 million of the value of an estate was tax-free. At the federal level, the inheritance tax doesn’t kick in for the first $5 million.
The current administration has raised the inheritance tax to $2 million, meaning that the first $2 million of one’s inheritance is state tax-free.
“What that means for The County is more family farms and small businesses will be able to avoid paying the Maine State Inheritance Tax, when it’s time, and that’s hugely important to businesses like farms where the land is worth a lot, but it’s not liquid,” Poliquin explained.
Charter schools
Until the legislation was recently passed, Maine was one of the only 10 states that didn’t allow publicly funded charter schools. The legislation allows the creation of 10 charter schools over the next 10 years.
“Think of what this could mean for The County,” Poliquin said, “we could have a charter school that focuses on agriculture … this is their heritage, this is where these kids work and [many] want to stay here and learn about this business; let’s give these kids an opportunity,” he added.
Hospital debt
According to Poliquin, the state had accumulated $500 million in hospital debt by the time the LePage administration came into office — some hospitals hadn’t been paid in five years.
“When the LePage administration came into office, we took that as an opportunity to pay off about $250 million of that debt,” Poliquin said.
