‘Tax conformity’ and teacher transfers

Dear Friends and Neighbors,

As you know, I try to keep you informed with a sampling of current legislative policy debates and to report clearly my own positions on these issues.  Below are two summaries from this week.

As always, please let me know your thoughts and concerns.

Tax ‘conformity’

As you may know, in December the federal government extended provisions to Section 179 in the federal tax code allowing businesses to write off capital investments, software, and equipment directly, rather than depreciating them over time.

Maine expands on this federal ‘bonus depreciation’ with the Maine Capital Investment Credit which benefits both in-state and out-of-state businesses.

So, this past week in the legislature, both the Taxation and Appropriations committees have been working on ways to update our own tax laws to allow Maine businesses equivalent state income tax reductions.

The Governor proposes that the state conform fully to the new federal tax code and also continue the Capital Investment Credit for at least the next four years.

The price tag for this would be $38 million for the next two years and presumably the same amount in the years beyond.

To pay for this, the Governor has offered a series of one-time funds including $3M from a fund dedicated to support efficiency in towns and schools and $1.4M from casino revenue currently dedicated by the voters for education.

While a few legislators (such as myself) still have some trouble understanding the economic mechanism of “retroactive incentives,”  certainly a majority of us support these tax benefits for businesses.  We understand that businesses depend on predictability and that long-term business investment is good for the state.

However, along with my colleagues, I also want to understand the larger implications of these tax breaks at a time when the Governor is proposing to shift $23M in school funding from the state to local property taxpayers.  I also want to understand how the state budget can structurally support tax expenditures of this magnitude going forward.

Any comprehensive discussion about the state budget requires participation from the executive branch.  But, so far, the Governor seems intent on keeping to himself information on current budget revenues and expenditures.  Unlike previous governors, he is unwilling to offer a supplementary budget adjusted to reflect his current proposals.

Apparently the Governor intends to propose budgetary changes only in the service of his own policy priority for tax reduction in order to reduce the legislature’s leverage over other comprehensive public priorities such as education, energy, and infrastructure.

My hope and intention is to move forward as directly as possible with immediate legislation to allow Maine taxpayers to file this year’s tax returns that conform to the new federal allowances.  Then, directly, I hope we have comprehensive discussion about how to allow business tax breaks going forward in conformity with federal law in relation to this year’s supplementary budget process. It seems only responsible.

News articles:

• Maine lawmakers continue to spar over extension of tax breaks, Press Herald
• House Dems adjourn in middle of tax conformity debate, Bangor Daily News
• Tax conformity must give the best deal to Maine people

Legislation under debate:

• LD 1564: An Act To Update References to the United States Internal Revenue Code of 1986 Contained in the Maine Revised Statutes
• SP 630: Joint Order, To Allow the Joint Standing Committee on Appropriations and Financial Affairs To Report Out a Bill Regarding Tax Conformity

School board policy on involuntary teacher transfers

LD 1544, An Act To Improve Teaching Assignments in Maine’s Public Schools, presented by Republican Senator Linda Baker and advanced by the state teachers union, sought to embed educational policy related to teaching reassignments in municipal labor relations law.

To accomplish this Senator Baker proposed specifically:

• To require advance notice for any transfer at least 60-90 days before the end of any school year;
• to require notification of the local association before any transfer was “contemplated”;
• to require professional development for transferred teachers; and
• to specify that transfers could not be made for punitive reasons

Practical problems of implementation and arbitration aside, at the public hearing both the sponsor and the union acknowledged that courts have determined that educational policy decisions can not be subject to collective bargaining as the bill suggests.  Further, the union did not help its case by exaggerating the number of involuntary transfers by a factor of 14.

Our committee unanimously agreed that school boards should have in place policies regarding involuntary transfers to ensure that transfers are being appropriately assigned by school administrators.

There was no evidence from the hearing that school boards are in any way opposed to emplacing such policies on transfers. But some committee members with school board experience said they were unaware of the existence of model policies on transfers.

As the custodians and overseers of local policy, for school boards the obstacle here appeared to be only unawareness of the issue, not any vendetta against teachers.

So, after discussion at the work session I joined the majority on our committee in asking our committee to write a letter to the Maine School Boards Association asking them to recommend that local schools have in place a policy on transfers and to provide with that recommendation their example of a model policy.

Had there been evidence either that school boards were opposed to having a policy on transfers or doubted their authority to adopt such a policy, our committee might have gone further with a mandate.

But, as there was no such evidence, I believe our decision was the appropriate one.