A Request To Representative McDonald for a Timeline of Changes in LD1 An Act to Stimulate Capital for Innovative Maine Businesses

Much to my surprise, when I recently clicked on my long standing link to LD1, it pointed to completly different content. The content which this link formerly opened is now called "original paper record. I have adjusted my list of links to incorporate the Original Paper Text, The Ammendment , and what is now called Public Law.You can locate them in the right side bar .

Without further ado, I am posting the letter I just sent to Representative McDonald in an attempt to establish a time line for the changes in the bill.

Dear Representative McDonald,


I recently received an email from you saying that you will keep in touch.

I was told by Representative McKane that you were on the committee for LD1- which goes by the title- An Act to Stimulate Capital for Innovative Businesses in Maine.

You may or not know that I write about the legislation that is passed by our legislature and so I have a list of links on my blog that I reference on a regular basis. The link for LD1 has been there since last spring when I first learned about the legislation around the time it was passed.

I was recently surprised to discover that the long standing link to LD1 link now points to completely different content.

The legislative website reports that the bill was passed on April 7 and signed on April 12. It was around that time that I contacted the web master to find out why there was no record of how each representative or senator voted. I was told that it was a gavel vote in which there was a call for objections and if there are none all are considered to have voted yes. I was also told that there were no objections.

At that time the content of the bill was the same as what is now listed as "original paper text. The fact of subsequent amendments indicates that there was a different version passed than what is now the content of the link- not just different but the original bill is erased and replaced.

And yet there are no further dates listed on the legislative website, which might lead some to conclude that it is the amended version that was passed on April 7 and approved by the governor on April 12.

I respectfully request that you provide a time line that includes the date of the amendment and when the amendment became public law.

Any further information about what has caused the bill to be completely replaced will be appreciated. I do not have the time during this busy moment to read the new version- but one can get the impression at a glance that the two versions were written by different parties. The first starts with a list of definitions, while the second just jumps in and starts talking about The Maine Public Employees Retirement Fund.

It’s Constitution Time, Governor LePage!

Note. This post was written as my introductory past for Portland, Maine edition of examiner.com. I applied and was accepted by Mr. Rick Brown with the words" You would make an excellent examiner". However when I went to post this article, I encountered a software glitch that prevented me from doing so. The examiner was changing its software and so at first I took it to be that I was encountering a general problem. However the glitch that I encountered was not listed in the common issues.

After a week of waiting for a response to my support ticket, and receiving no communications from normal channels, I contacted Rick Brown, who promised to look into it. After another week of waiting for further response form Rick Brown, I wrote and indicated that at that point I was inclined to believe that the software glitch was there by intent. Over a week has passed since then and I have received no further communication from Rick Brown. I no longer take seriously being a contributor to the Examiner.com. 

I believe that there are political forces at work that have an interest in silencing any discussion of the mountain of state capitalism that has been constructed by our legislature, with astounding speed, over the last fifteen years. The only way to know about it is to read the original sources- the legislative bills that have constructed it. I have provided a list of links to some of this legislation in this post.
It’s Constitution Time, Governor LePage!


The election is history and now LePage is Maine's governor to be.

As with the nation, the economy, the economy, and the economy are the first order impacting the now and future Maine. Inseparable from the economic debate is a debate about which political philosophy will lead Maine into the new decade and beyond.

LePage campaigned as a constitutionalist. Lepage has been among those that say it is not the role of government to create jobs, but rather to create an environment furthering creation of private sector jobs. The method by which the government influences the environment is slippery territory, which is why the constitution needs to be applied like a golden rule.

To my knowledge, LePage has not expressed a view on the entrenched structure of state capitalism, constructed by the Maine legislature over the last fifteen years. The legislation often reads like a corporate business plan. It is clear that our past and current legislature and administrations believed that it is their role to manage Maine’s economy and to move Maine toward their vision of the way we ought to be. The legislature has repeatedly utilized special acts of legislation to charter corporation after corporation, always promoting and justifying the acts with the vision that they are creating jobs.

Article IV, Part Third, Section 14 of the Maine State Constitution states in no uncertain terms that corporations shall not be created by special acts of legislation:

Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature, except for municipal purposes, and in cases where the objects of the corporation cannot otherwise be attained, and, however formed, they shall forever be subject of the general laws of the state 

 And yet state capitalism has been advanced with astounding speed.

The corporations, chartered by special act of legislation, and other associated legislation created since 1995 include:

1995 The Small Enterprise Growth Fund

1995 Contractual Agreement with the Maine State Public Employee’s Retirement Fund embedded into The Maine State Constitution, Article IX, Section 18-A and 18-B

1999 The Maine Technology Institute

2007 Government Task Force of Wind Energy Development

2007 Maine’s Innovative Economy Advisory Board

2008 Maine Expansion Fund

2009 An Act To Lower the Cost of State Government in the Departments under the Purview of the Joint Standing Committee on Natural Resources

2010 An Act to Stimulate Capital Investments for Maine Businesses
2010 The above act was amended by deleting and replacing the entire text.
The Amended Act became

An Act To Stimulate Captal for Innovative Maine Businesses
I am still researching the time line.

2010 The Maine Limited Liability Act ( into which was inserted a classification for the L3C)

In 1995, The Small Enterprise Growth Fund was chartered by special act of legislation. It focused on investments in Maine businesses. The Taxpayer accounts for 10% of the investment in “the fund”, as the SEGF is identified in the legislation. The taxpayer’s investments always “roll over” to reinvest in “the fund”. The other 90% of the investors are private “high growth” investors who require an “exit strategy” in order to realize a profit. The legislation mandates that The Small Enterprise Growth Fund submit it’s annual report to the legislature. The annual report is not readily accessible to the public, although the public is an involuntary investor in this investment corporation.

The Small Enterprise Growth Fund does not have a government web address, indicating that although it reports to the legislature and was chartered by the legislature, it is a private corporation. This is a common structure for the corporations that the legislature has chartered during the last fifteen years. The 1999 Annual Report for the Maine Technology Institute identifies the structure of the corporation in the following manner

MTI is a private, non-profit (501(c) 3) organization. It receives a direct appropriation from the Legislature through the Department of Economic and Community Development. $9,600,000 was appropriated to MTI for the 1999-2000 and 2000-2001 biennium. MTI is limited to using up to 7% of the appropriation for administrative costs. MTI is governed by its By-Laws (Appendix C), consistent with the word and intent of the legislation

The Maine Technology Institute is a nonprofit research corporation which functions as a conduit for transferring capital from the taxpayer and other sources available to non-profits to private commercial enterprises, which realize healthy profits from this arrangement. Like a magician doing a slight of hand trick, the government promotes jobs created thanks to the investment and research corporations chartered by special acts of legislation. The quasi government network regulates “social benefit” requirements on the beneficiaries of the re-channeled capital resources. The money flows from the taxpayer and other sources to the MTI to the MEP (Manufacturing Extension Partnership) to the privately owned business. The main stream media functions as the public relations arm of the quasi governmental network, exclusively encouraging the public perception that all is well and good because the government is creating jobs, and not to notice that capital funds are being transferred from the general economy to those that serve the government sanctioned “social benefit” agenda.

The social benefits are not completely defined in the legislation but instead much is left to the discretion of the Small Enterprise Growth Fund which functions as the head honcho in the network of government chartered corporations. At one time the Small Enterprise Growth Fund published the social benefit requirements on its web site but at last inspection they were not to be found. The social benefits included mandating that recipients of capital provide 50% of the employee health insurance as well as providing for pension funds. This in the face of the huge unfunded public liability resulting from the original government chartered corporation, The Maine Public Employees Retirement Fund- and so- highly problematic government policies are mandated on the private sector by the quasi governmental network.

LD1, legislation passed in early 2010 is misleadingly titled “An Act to Stimulate Capital Investment For Maine Businesses”. LD1 expands the authority and reach of the Small Enterprise Growth Fund, which is authorized to manage the “Fund of Funds”, a mutual funds investment corporation. Despite the title of the legislation, the text of the legislation prohibits investment in individual businesses and reduces the requirement to invest in Maine to a mere token. LD1 authorizes The Small Enterprise Growth Fund to minimize the risk for the private investors to the tune of 80 percent of a potential loss to be covered by the taxpayer in the form of “tax credits”. The Maine Public Employees Retirement Fund is identified as the “preferred investor”, And in so doing enabled the proponents of the new mutual funds investment corporation to tout the “Fund of Funds” as a benevolent solution to the unfunded liabilities created by The Maine Public Employees Retirement Fund. However to date the latest MPERS email newsletter made no mention of investing in the Fund of Funds, nor have I heard of it else where.

This is the climate in which our new governor finds himself. Will LePage take on the constitutionality of the massive structure of state capitalism in Maine? LePage has yet to comment on government-chartered corporations as a constitutional issue. As an election issue this is not an indicator as it is not a good election strategy to raise an issue with which the general public is disengaged. If state capitalism is ever to be reversed, the general public must become engaged.

This past election has shown the potency of public participation in the process. As an infamous politician recently said “Why waste a crisis?” That sentiment can be turned in any direction. We are still in crisis mode, though some would have us believe that we are past it, but that surely cannot be for the people of Maine who have the unfunded liability to Maine Public Employees Retirement Fund. Around 1997, the contractual agreement with MPERS was embedded into our constitution, conflicting with Article IV, Part Third, Section 18, of the Maine State Constitution which says that all corporations, however formed, are subject to general laws. The implication of embedding a corporation’s contractual agreement into our constitution creates an ominous precedent. The roots of state capitalism are long and deep in our past but If not now, then when can they be rooted out?

When, in 1947, the Maine Public Employees Retirement Fund was chartered by a special act of legislation, it was done with these words: “This is an essential government function”. The same words were used to charter The Small Enterprise Growth Fund. Although the state government had existed for many decades without either corporation, it was not deemed necessary to justify the claim, which is the basis of a political philosophy radically different from the political philosophy, which formulated the constitutions of Maine and the United States. Now is the hour to have this conversation. Good Morning, Governor LePage!

After Note: As I was working on the links  for this post, I realized that the 2010 “Act to Stimulate Capital For Maine Businesses” has been amended by deleting and replacing the entire text of the bill (See links above). I have not had time yet to read the new version but on first glance it appears to be that the Maine Public Employees Retirement Fund is no longer the “preferred investor”, it is now the only investor. The Small Enterprise Growth Fund no longer manages the “Fund of Funds”- now the fund is managed by The Finance Authority of Maine.

I am researching the time line but will not be able to immediately read the new version of the bill as this is a busy time of year. I will be posting on this matter and the amended version of the bill at a later date.

On Maine Web News, Candidates Discuss The Maine Public Empoyees Retirement System but avoid the Constitutional Mandate.

Maine Web News- The Candidates Discuss MPERS


Lepage promises to honor promises to state employees pension funds and suggests changing the system for future employees. Lepage says he will have to talk to the legislature, but does not explain why- which is because contractual terms of agreement have been embedded into the Maine State constitution since 1997. For a candidate who is running on a platform that includes respecting the constitution, I find this failure to mention the constitutional mandate which clearly impacts the unfunded liability problem disappointing.


Both Kevin Scott and Moody articulate the solution better than LePage, who suggest the same ideas, but not as forcefully. All agree that the problem must be "isolated" to quote Kevin Scott, meaning that future employees must be hired on a different set of terms. Moody addresses the issue of risky investment choices made by the managers of the MPERS fund more forcefully than the others and he brings up a crucial point that others failed to mention - The contractual agreement with the Maine Public Employees System, which is embedded into the Maine State constitution makes all business investments in Maine very risky. There is an element of uncertainty, affecting potential business investments, as to how the constitutional mandate may be enforced in the future- and so it is arguable that both the creation of the MPERS investment fund, through special act of legislation, and the constitutionalizing of that fund's contractual  agreement have created the need for further government chartered investment corporations- all of which use tax payer dollars to give government chartered investment companies the edge over the private sector.


Like MPERS, the Small Enterprise Growth Fund was chartered by a special act of legislation with these words; "this is an essential government function" Is it? This is the question that LeBlanc should have asked but instead the problem of the unfunded liabilities created by the MPERS investment fund was discussed as though there were no relationship to The Maine State constitution (Article IX General Provisions, Sectio 18-18-B). How can we return to the premise of our constitution when we ignore the Maine State constitution in our collective dialogue? As new media, LeBlanc can lead the way in recognizing the big gorilla in the works.


Early in 2010, the legislature added another government chartered investment corporation to it's portfolio with yet another the special act of legislation chartering yet another capital investment company. LD1, bears the title "An Act To Stimulate Capital Investment for Innovative Businesses in Maine" although the legislation prohibits investing in individual businesses and mandates investing in mutual funds. LD1 requires that the mutual funds give "strong consideration" to investing in  this state.....and  "Will maintain at least a periodic presence in the State".




LD1 or "The Fund of Funds" cites The MPERS investment fund as it's preferred "lender" (meaning investor). I has been sold as a benevolent act by the Maine legislature to relieve the Maine people of their unfunded liability to MPERS. However MPERS does not mention LD1 in it's recent news letter. Perhaps because, with the taxpayers signed up as the risk bail out fund for "The Fund of Funds", the investment strategy of that fund is too risky, even for MPERS, which also relies on the Maine state taxpayer as a bail out fund. neither government chartered investment company provides the Maine state taxpayer a profit share. The justification for using the Maine taxpayer as a bail out fund appears to be simply that our government is "creating jobs",- in the chosen sectors that serve the government's design to transform Maine into a better place- at least according to our government's approved network 
 
The favored economic sectors are mandated in the newly chartered mutual funds investment corporation.
 
They are:
 

49-J. Targeted technologies. "Targeted technologies" means biotechnology, aquaculture and marine technology, composite materials technology, environmental technology, advanced technologies for forestry and agriculture, information technology and precision manufacturing technology.

Once again the legislature clearly identifies the special interests which will be the beneficiaries of the special act of legislation chartering "The Fund of Funds".


Article IV Part Third , Section 14 is quoted at the top of this blog.

According to The Maine State Constitution- A Reference Guide by Marshall J. Tinkle “Special or private laws relate to particular persons or things or operate on a selected class rather than on the public generally”

MPERS is a special class of persons - NOT the public generally.The targeted technologies which are being advanced by Maine's network of government managed economy is a special class of things.


LD1 also identifies the government network as those that are favored by this legislation when it includes the following in "Investment goals and guidelines"

B. Will build linkages to, and accept referrals from, at least some of the organizations promoting the State's innovation economy, including the authority, the Maine Technology Institute under Title 5, section 15302, the Small Enterprise Growth Fund under section 383, the Department of Economic and Community Development, the Maine Patent Program under section 1921, the University of Maine System and other venture capital investors within the State;

The guidelines also include:

E. Demonstrates the ability to make successful venture capital investments.

So what happens if the investment fund instead demonstrates it's ability to successfully lose large sums of capital?


That is why they included the taxpayer as bail out fund in the special act of legislation chartering a mutual funds investment corporation to benefit special classes of people, and special industries and to work with a special network of agencies.

To Profit- Or not to Profit? What the Heck- Why not Both!?!

It has come to my attention, through that grapevine known as "the internet", that under discussion in the Maine state legislature is the creation  of a legal business entity that is a hybrid between the non-profit and "low profit" organizations. I have not yet been able to locate any specifics about the bill as it would stand in Maine. In North Carolina, it includes small manufacturers, but the usual definition of an LC3 is just a manipulation of the non-profit category so that investors can make a profit.

Here is a defintion from The Non-Profit Law Blog

"The low-profit, limited liability company, or L3C, is a hybrid of a nonprofit and for-profit organization. More specifically, it is a new type of limited liability company (LLC) designed to attract private investments and philanthropic capital in ventures designed to provide a social benefit. Unlike a standard LLC, the L3C has an explicit primary charitable mission and only a secondary profit concern. But unlike a charity, the L3C is free to distribute the profits, after taxes, to owners or investors. "

I do not know if  the investor retains a tax benefit for "donating" money to a non-profit organization, and if so, if that would be before or after paying taxes on his profit. The language used in defining the hybrid is "low profit" organizations- with "low profit" as yet undefined. I will be interested to see if "low profit" is defined in the legislation, should it come to pass.

Burton A Weisbrod is an economist who has written in length about the non-profit sector and it's relationship to the government sector and the private economy sector. The problems of the nonprofits already hybrid capitalization will not go away if the legislature creates a new legal hybrid.

This is the blurb from "To Profit or Not to Profit " Edited by  Burton A Weisbrod

Nonprofit organizations are changing dramatically in the ways they are financed. They are becoming increasingly commercial, operating more like private firms. Far more is involved than the generation of revenue. As donations decline in importance and user fees and money-raising ancillary activities come to dominate, they bring side-effects on the social missions that justify public support. This book examines these little-recognized relationships for the overall nonprofit charitable sector and then focuses on each of six industries; important differences are found among hospitals, universities, social service providers, zoos, museums, and public broadcasting."

"

Socializing the Risk and Privatising the Gain

Introduction: Below is a post formerly published on the former Augusta Insider. It concerns relatively recent Maine Legislation . The summary in the legislation states "This bill is modeled on statutes in Arkansas, Iowa, Michigan, Montana and Utah. It authorizes the establishment of the Maine Fund of Funds within the Small Enterprise Growth Board for the purpose of increasing the availability of venture capital to the Maine economy. "

The legislation does not provide the specific statutes of the states that are used as a model for this investment scheme. I looked up the constitutions of Iowa and Arkansas to see what their statutes say about the creation of corporations. Iowa's constitution is very strict about prohibiting the creation of corporations by special acts of legislation, while Arkansas's allows for more latitude than the Maine State constitution. There are several states that use the same language prohibiting the formation of corporations by special acts of legislation. During the period from the American Revolutionary War to 1875 when Article IV, Part Third, Section 14 was added to the Maine State Constitution, Americans were very involved in their constitutions. There were many compilations of state constitutions published during that time, some of them organized by subject. A quater of a century, prior to the inclusion of Article IV, Part Third, Section 14, The Communist Manifesto was published , which targeted The United States of America as the enemy. The Communist Manifesto also targeted "capitalism" by which was meant "private capitalism" and the solution of course was "state capitalism" a system in which the flow of capital is owned and/or controlled by the state.

Then, as now, the states all look toward what the other states are doing.

Socializing the Risk and Privatizing the Gain


I recently wrote about two pending legislative bills, LD1 and LD166.

LD1666 grants tax credits to venture capitalists and non-profit organizations, regardless of their status as taxpayers. The appropriations committee declined LD1666, but that is of little consequence since the ability to provide tax credits to venture capitalists and non-profit organizations is granted by the latitude extended in LD1 The bill allows for loans procured by the newly created “Fund of Funds” to be secured by “tax credits” but the lenders need not be qualified Maine State taxpayers. LD 1 includes an assertion that the tax credit used to secure the loans is not a security but fails to provide substantiation for that claim. Given our lawmakers level of awareness of the Maine State Constitution, is it justified to accept their claims about whether the “tax credit” is, or is not, a “security” without any further input from outside opinions?

The legislation repeatedly inter-mixes the words “security” and “tax credit” in the definition of other terms

5. Lender. "Lender" means an entity that lends capital to the fund in exchange for a return on the lender's investment that conforms to the conditions of certificates issued as security for the debt.


2. Certificate. "Certificate" means a document executed by the board extending the State's guarantee to a lender by means of a refundable tax credit.


6. Refundable tax credit. "Refundable tax credit" means the credit authorized by Title 36, section 5219-DD that the State shall redeem for cash if the holder has no tax liability against which to apply the credit. A refundable tax credit may be owned and redeemed by the system. (Title 36,section 5219-DD is a credit applicable to dentists practicing in underserved areas. It is perplexing how the same statute is transposed to the venture capitalist investor, who, by the parameters stated in the legislation can invests anywhere in the world using the Fund of Funds as a conduit. The tax credit issued to dentists is not refundable)


§ 399. Refundable tax credits The board may issue to one or more lenders certificates for up to $80,000,000 in refundable tax credits as provided by Title 36, section 5219-DD (The tax credit in Title 36,section 5219-DD , issued to individual dentists is not to exceed $15,000 )


1. Redemption. Refundable tax credits may be redeemed only as necessary to offset a shortfall in scheduled payments on debt incurred to capitalize the fund. The rate of return, whether fixed or variable, must be determined by a formula stipulated in the certificate used as security. Refundable tax credits may not be redeemed for any default occurring after December 31, 2031. No more than $10,000,000 of refundable tax credits may be redeemed per calendar year.(The credit issued to dentists in Title 36,section 5219-DD, is not refundable. In the declined LD1666, The Tax credit for venture capitalists and non-profit organizations was capped at 60% )


4. Not securities. The refundable tax credits allowed or transferred pursuant to this section are not securities under Title 32, chapter 135. (You can read that definition by clicking on the link and judge for your self )

LD1, now enacted into law, is a far-reaching piece of legislation, expanding outward to partake in the limitless opportunities existing beyond Maine’s borders and backing up investments with tax payers dollars in the form of a guaranteed refundable State of Maine tax credit. The creation of “the Fund of Funds” is arguably in violation of Article IV. -- Part Three. Section 14 of the Maine State Constitution, which states:

Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature, except for municipal purposes, and in cases where the objects of the corporation cannot otherwise be attained; and, however formed, they shall forever be subject to the general laws of the State (emphasis added)

One need only to measure the rules, regulations, and guidelines presented in this bill against any standard definition of a corporation to judge for one’s self whether the words, “the fund of funds”, used in the legislation are cloaking the reality that the bill is in fact a charter for a new corporation. Even if one could argue exceptions to the rule that prohibits the creation of a corporation, through a special act of legislation, there is no general law in this state that grants corporations the right to back up investments with taxpayer dollars.

LD1 identifies the preferred lender as “the system” and defines the “system”, for the purposes of the legislation as “the Maine Public Employees Retirement System”. It states that the purpose of the “fund of funds” is to make a profit for the lender. It identifies the board as the Small Enterprise Growth Fund and at the same time it loosens the requirements that the funds be invested in the Maine Economy

Were it not for the fact that mutual funds offer no guarantees, LD 1 reads like the creation of a mutual fund by the government and for the government. To confirm this for your self, read LDI side by side with the definition of a Mutual Fund.

Lawmakers and citizens of Maine should be familiar with Article IX, Section 14 of the Maine State Constitution, which begins with the following words:

In the charter creating “The Fund” and “The Fund of Funds”, it is stipulated that the administration costs are to be derived from the funds themselves. In the case of The Small Enterprise growth Fund, there is a 10% taxpayer investment for which any profits derived always roll over to re-invest in the fund. It is fair to speculate as to whether the legislative charter that created The Small Enterprise Growth Fund enables the administration costs to be paid by the taxpayer. If the annual report were publicly accessible one would be able to make a comparison between administration costs and the 10% roll-over tax payer investment. The SEGF website is not a government website, and so it is reasonable to conclude that the SEGF is legally structured as a separate private economy entity.

“The Fund of Funds” does not rely on a 10% investment from the taxpayer. Instead It uses the taxpayer to provide security for that which, by another name, is a mutual fund.

In the words of Elliot Spitzer, former Attorney General of New York, you cannot “socialize the risk and privatize the gain”, but this is exactly what the “Fund of Funds” achieves.

The charter (LD1) creating the “Fund of Funds” extends the reach of The Small Enterprise Growth Fund, while LD 1659 directly applies this expansion to include The Small Enterprise Growth Fund, authorizing it to invest in a “side” fund for which there are no defining parameters. It also permits the side funds to be structured as a “revolving fund”, which is the structure used for taxpayer investments in The Small Enterprise Growth Fund. The charter also permits side funds to be structured as “as a fund in which the investor will have funds drawn and returned over an agreed time period.” in other words to have an “exit strategy” which is a demand placed on “the fund” by the unidentified venture capitalists who account for the other 90% of The Small Enterprise Growth Fund’s resources.
“The Fund” and the “Fund of Funds’ are justified by it’s creators with the end of attracting capitalization for the Maine economy, and focuses special attention on investments in technology. This is an “end justifies the means” validation for the betrayal of sworn oaths to uphold the Maine State and United States constitutions. The founding fathers of the United States Constitution had the wisdom to consider the spectrum of human character in creating a constitutional system of checks and balances. The charter establishing the “Fund of Funds”, at best, assumes that only the best of human character will ever administer this fund, while it leaves the door wide open for exploitation and corruption.
In addition it gives an unfair advantage to government chartered investment corporations competing in the same market as private sector investment corporations. According to Article IV, Part Third, Section 14 of the Maine State Constitution, all corporations are subject to general laws- however they are formed. Where is the general law that allows corporations, in general , to use tax payer dollars to further their own ends- and in the case of  The Maine Public Employees Retirement Fund , to embed contractual agreements in The Maine State Constitution?

We have heard of similar investment strategies in recent history. Iceland, Harvard University and Bernie Maddoff come to mind. Like our lawmakers, the investors in these “financial vehicles” believed in the assured wisdom of their investment strategies.

There are no parameters within the legislative charters that limit the scope of investments outside of the Maine state economy. Given this lack of definition, an investment or lender in China is authorized. Investments in China and third world economies are attractive to high growth investors due to nearly, absent labor rights laws and minimal environmental regulations making it substantially less expensive to do business in those economies than in the United States.

The charter that created the Small Enterprise Growth Fund, included “public good” mandates. The new legislation deregulates the fund from the original parameters and so negates the “public good” used to justify the creation of the SEGF.

Whenever a loan is guaranteed by a refundable tax credit, Maine taxpayers carry the risk, but there are no benefits for the general taxpayer to compensate for their contribution and/or the risk, other than the vaguely defined phrase that it “benefits the economy”- but so do those funds if they are retained by the original creators of underlying wealth through lower taxes and the latter option does not violate our constitution.

.

Cutler and LePage - Unaware or Willfully Silent?

In a recent debate between gubernatorial candidates Elliot Cutler and Paul LePage, Cutler states that he would transfer the licensing and responsibilities of the LURC (regulating land use) to The Department of Environmental Protection.

However in legislation passed around 2005 - - The Department of Environmental Protection and the Department of Economic and Community Development were merged into a single agency called "The Office Of Innovation" which is part of the unconstitutional expansion into state capitalism which has been radically advanced in Maine over the last fifteen years - with out any notice from Maine’s main stream media. - Or for that matter from any of our current candidates for the office of Governor.

Cutler speaks as though the Maine Department of Environmental Protection is still an independent agency-, which it is not - and LePage does not call him out on it. Are the candidates unaware of the legislation combining so many interests under the authority of one consolidated power? Imagine the further consolidation of power into the governing hands of state capitalism that this transfer would represent - And why does Cutler not say that it will be transferred to the Office of Innovation along side the Department of Environmental Protection and the Department of Economic and Community Development as the following quote from the legislation describes?

Sec. 4. Transfer of duties. The Commissioner of Environmental Protection and the Commissioner of Economic and Community Development shall coordinate to ensure that the duties, functions and responsibilities of the Department of Environmental Protection, Office of Innovation and Assistance are transferred in a timely manner to the Department of Economic and Community Development, Office of Innovation. The Department of Economic and Community Development, Office of Innovation shall assume the duties, functions and responsibilities transferred to it in this Act within existing budgeted resources.

SUMMARY
This bill eliminates the Department of Environmental Protection, Office of Innovation and Assistance and transfers the duties of that office to the Department of Economic and Community Development, Office of Innovation. This bill also eliminates funding for a total of 7 positions within the Department of Environmental Protection, 5 of which are associated with the Office of Innovation and Assistance and 2 whose duties include serving as legislative liaisons for the department.

Can Art and Culture Thrive Outside Of Government Oversight?

The Tea Party Movement in Maine is often described in terms of its “radical fringe” which is depicted as a gun-toting crowd. Although I support the right to bear arms, I have never held a gun and yet, based on the general Tea Party Platform, which primarily targets welfare reform as the means by which the size of government should be reduced, I find myself in small company in suggesting a different set of government agencies that deserve to be examined in consideration of reducing the size of government. I have written frequently about state capitalism in Maine and its unconstitutional foundation. The Maine Arts Commission works in conjunction with state capitalism and is a more highly visible player within “the creative economy”

The Maine Arts Commission recently sent a survey, which included its long and short-term vision for arts and culture in Maine. I selected the “other” category in order to describe my interest in arts and culture as a private economy arts related business. In recent years the Maine Arts Commission has become increasingly upfront about primarily serving the non-profit community. In an email earlier this year, the Commission announced that “stimulus” funds were available, but upon clicking on the link one learned that the “stimulus funds are for non-profit organizations only”. The Traditional Arts grant is listed as “giving first priority to non-profits”, a purely political priority, bearing no intrinsic relationship to the practice of traditional arts.

Government activities are funded by the taxpayer, and yet the Maine Arts Commission, which perceives it’s mission as the over seers of Maine arts and culture, gives priority to tax exempt organizations, even when funds involved are purportedly for the purpose of stimulating the economy. From the perspective of a micro-economy business, which has interacted over the years, with numerous non-profit organizations, this is disturbing. When it comes to business practices, I have often found that non-profit organizations exist in a world of their own and often, when given state sanctioned power and authority, re-invent long existing standards to benefit their own interests. This was the case with the Maine Crafts Association, who was authorized to manage a Maine products retail store for the Maine Turnpike Authority and decided that it was appropriate to charge a “jury fee” to crafters for the opportunity to present their work to the buyers for consideration to be sold in the Turnpike retail store. The jury was described as a “panel of experts”, but a request for the identity of those experts never received an answer, which would not have made a difference to our Maine made ceramic business. We have been wholesaling our work to fine stores and galleries for over half a century and have never been asked to pay a “jury fee” in order to show our work to a perspective buyer. This is an approach that separates private economy business practices and those that are re-invented by the tax-exempt community. There are of course exceptions to the rule, within the non-profit sector, but the exceptions that I know of are likewise exceptional in that they do not rely on fundraisers to underwrite their own operations, operations, which are funded instead by functioning on equal terms and practices within the private economy market.

I stand with those that believe in the small government envisioned by the United States founding fathers. Within that context, it is not the function of government to manage arts and culture. Government managed art and culture can be used to advance partisan political ideologies, which the Maine Arts Commission policies confirm with their practicing bias against small privately owned enterprise.

The Maine Arts Commission was created in 1933, in the same era that The Maine Employees Mutual Investment Fund came into being. At that time the Commission was for the purpose of purchasing art for government buildings.
When in 1966 The National Endowment for the Arts was created, the Maine Arts Commission became an arts agency for facilitating the distribution of government grant money. MAC is funded in part by the National Endowment for the Arts.

The National Endowment for the Arts is currently cited in the report by the U.S. House of Representatives Committee on Oversight and Government Reform for promoting partisan politics. The report alleges, “The White House also leveraged ties to the arts and entertainment community to embed propaganda in the content of television programming and artwork. These propaganda efforts violated appropriations riders and federal law prohibiting the use of appropriated funds for publicity or propaganda purposes”.

The report from the Committee on Oversight and Government Reform cites the National Endowment for the Arts as directing the participants to serve the political agenda of the Obama administration, which is now commonly viewed as advancing a socialist “fundamental transformation of America”.

The report from the Committee on Oversight and Government Reform states:

I have seen the workings of grant matching in the traditional arts. The governor agrees to fund a project on a matching basis. The governor must be aware that non-profit organizations can channel money from outside to within the state. When the governor offers a matching grant it becomes much easier for the non-profit foundation to attract funds. Whether or not the intrinsic value of the project being funded plays a role in the governor’s decision is pure speculation for those outside the inner decision-making circle. Non-profit organizations undeniably pay a role in channeling money into our state, which has one of the highest numbers of non-profit organizations in the nation.

“NEA is the largest annual national funder of the arts. Funding for artists from NEA is often worth more than the value of the grant - each grant dollar typically generates up to seven times more in matching funds. Neal’s entire budget ($155 million for FY 2009) is derived from federal funds. When Sergeant told participants “we want to encourage you to take advantage of this opportunity,” he was signaling that failure to participate could affect their status as NEA grantees. Not surprisingly, just three days after the August 10 conference call, 21 arts groups signed a press release endorsing the President’s health care plan. Of those, 16 either directly received grants from NEA or are affiliated with groups that received NEA grants within the previous four months.”

The Maine Arts Commission receives grants from the NEA. It is in partnership with the non-profit foundation, The New England Foundation for the Arts, also funded by the NEA. The Maine Arts Commission is a funder of “Culture Count” the database for the non-profit New England Foundation for the Arts. All of the state art agencies in New England are partners and funders and most likely, they all have their own databases, which do not entail a user terms of agreement as is the case with The Maine Arts Commission. This begs the question “what is the reason for a centralized database for all of New England? Is it so difficult to search each individual state’s database separately that investing in the expense of a central database is justified? - Or could it be that there are laws prohibiting the use of user terms of agreement for government agencies that might explain why neither the Maine Arts Commission nor the National Endowment for the Arts have a User Terms of Agreement, where as the non-profit foundation known as The New England Foundation for the Arts has such an agreement? I have read on the NEFA website that if one is willing to pay the price of entry that one can gain access therein to a treasury of grant information. By choice, the price far outweighs the temptation to feast on the promised fruit of knowledge. I cannot comment on what lies beyond acceptance of the User Terms of Agreement. Speculatively, centralization lowers cost of maintaining a grants related database, but that does not explain or justify the price of admittance to the inner database of grant information.

I have been questioning the New England Foundation for the Arts, Terms of Agreement, since 2007. This agreement grants to the NEA unrestricted copyrights over work that is published in it’s data base, including work that is “deep-linked” to any website listed on its database. I have no idea what the term “deep-link” implies- nor is that term defined in the user terms of agreement. While NEFA grants unto itself the right to “deep-link” to any page on a site listed in its database, it prohibits the user from deep –linking to any page of NEFA, permitting only links to its home page. By claiming rights over the work submitted to its database, including the right to alter the work, the New England Foundation For the Arts is undermining private ownership, which can arguably be considered as an act advancing a political agenda. Put this together with the bias against privately owned micro-businesses that the Maine Arts Commission demonstrates in its policies and there starts to be evidence of a pattern – one that is more compatible with socialism and collective ownership than it is with the individual rights guaranteed by the United States Constitution. The collusion of government and non-profit organizations raises the question; if a government agency forms a partnership with a non-governmental entity, what laws govern the partnership? - Laws pertaining to government – or laws pertaining to non–government?

The Maine Arts Commission has recently announced that it will use, not it’s own database, but the New England Foundation for the Arts database to process grants. The Maine Arts Commission contributes funds to the NEFA data base-, which means the Maine Taxpayer funds the non-profit organization, NEFA. The National Endowment for the Arts funds the Maine Arts Commission and the New England Foundation for the Arts, which means the United States taxpayer is also funding Culture Count, the database developed by NEFA, which claims unrestricted and unreasonable rights over submitted material and also requires that the user agree to never sue NEFA for any reason- moral or over intellectual property rights –or otherwise.

In the years since 2007 I have contacted both the NEFA and the Maine Arts Commission concerning my objections to NEFA’s terms of agreement. I have received rhetorical responses but the Terms of Agreement remained unchanged. There was one change - that is the name of “Community Logic” which is described as “an information technologies provider for cultural organizations and foundations.” It was formerly called “Cultural Logic”. After I mentioned in a blog that “Cultural Logic" is also the name of an online Marxist magazine, the name was changed to “Community Logic”. In 2007, I counted 45 professionals from United States universities listed as contributors to Cultural Logic. The university culture is also a source from which government art agencies derive their employees.

I haven’t followed the Small Business “stimulus bill” in great detail but I heard a senator explain that he was against it because it was a small business “Tarp” which would allow the federal government to take over ownership of small businesses just as it took over ownership of large auto companies. In light of the New England Foundation for the Arts Terms of Agreement, this seems consistent with an insidious movement towards socialism that is underway in this country. The NEFA Terms of agreement grants itself rights over any work accessible on a website listed in the collective database funded by the government art bureaucracies of New England. The Database is not limited to what is traditionally considered to be “the arts” but is encouraging all “cultural organizations” to list, which requires accepting the terms of agreement. Considering the radical direction in which this country has rapidly progressed since I first encounter’s the NEFA Terms of Agreement in 2007, this is not a matter to be taken lightly. This database potentially targets every small business in New England, and through the user terms of agreement claims a shared ownership in anything that is published therein or by which there is a connection through “deep-linking”. Small businesses are the seeds that become larger businesses and so the “cultural logic” of the Terms of Agreement has huge future implications that are directly impacted by the social, economic, and political direction into which our nation develops.

The arts are a wonderful and meaningful part of life. They have always existed and will always exist. It is a mistake to expand government management of art and culture. All the more so in the current political climate- and not to mention the huge deficits that need to be reduced at both the federal and state levels. If government management is extracted from Maine arts and culture, Art will find it’s own way. Art is an eternal part of human nature. It cannot be destroyed, but it can be filtered and directed through and by political and cultural means.

Defining Terms

As some who might read this may know, the journalist and author, Colin Woodard , is a relative of mine. Colin wrote an article, Brewing Up A Storm, on the Republican Party's new platform for the September 2010 Downeast Magazine. I posed the following comment in repsonse.

Defining Terms


If the term centrist is supposed to mean a point in between the small size of government favored by our founding fathers and those who believe in a larger government providing certain entitlements for the people, then it raises the question why the term ”centrist” applies to the entrenched political system in this state, which has collectively advanced state capitalism over the past fifteen years, including this year’s recent passage of LD1, which unconstitutionally charters a mutual funds investment corporation .LD1 was sponsored by none other than Peter Mills, who is calling those who want to return to the state and federal constitution “far right extremist”. In the creation of investment corporations, through special acts of legislation, the entrenched political system in Maine has passed far beyond “centrism”. It is incredulous that Peter Mills would characterize a state congress that has instituted an expanding state capitalism system over the past fifteen years as “Reagan conservatives”, an identity associated with tax cuts and rolling back government. Expanding capitalistic investment corporations, subsidized by the taxpayer, does not qualify as “rolling back government”- rather it grants state capitalism a competitive edge over the private economy which competes in the same investment market as the government- and in fact underwrites that competitive edge, which special acts have legislation have granted to state-sponsored capitalism.



This articles does not make mention of the fact that the primary thrust of the new Republican platform is to return to the rule of law as written in both the Maine and the United States Constitution. The details that are mentioned here are from a much larger list of articulated details relating to the essential theme of rule of law, which is ultimately based in constitutions. Peter Mill’s characterizing of the tea party movement is itself extremist. Intentionally talking about an alleged element that even Mr. Mills acknowledges is a fringe element, all the while ignoring the main stream of the tea party movement. The intent is obvious. Before Mr. Mills accuses others of not abiding by the “Supreme Court”, he should himself answer the question “How do you reconcile the recently passed LD1 With Article IV, Section 14 of the Maine State Constitution which states “Corporations shall be formed under general laws, and shall not be created through special acts of legislature” ?



This is one former supporter of Snowe and Collins who will no longer vote for these political wild card players. Many felt betrayed when Snowe and Collins handed the stimulus bill to Obama but were ready to reconsider after Snowe and Collins held back on the “too big to read” health care reform bill, but when Collins and Snowe handed over the financial reform bill, which should have been rejected merely on the basis of sheer size and the magnitude of regulations that are added to the magnitude of other regulations in bills previously passed by congress on a “too big to read” basis, it became perfectly clear that Snowe and Collins are unclear in their own minds what the issues are and what side they are on. Forgetting the content of the regulations. The sheer magnitude of regulations are “overwhelming” the private economy, which unlike congress cannot “pass a bill to find out what is in it” but must act on the rational principle of knowing what the thousand upon thousands of new regulations are, before making plans, or hiring more employees.

Government Arts unequivically equate "the arts" with "non-profit organizations"

The Email from The Maine Arts Commission says it all:
The Maine Arts Commission Presents
Arts in Crisis: A Kennedy Center Initiative
There are only 70 seats left for this free event, sign up today.
Michael M. Kaiser, president of the John F. Kennedy Center for the Performing Arts, will visit Portland, ME, on July 1 as part of “Arts in Crisis: A Kennedy Center Initiative,” an arts management symposium. Kaiser will provide counsel and encouragement to nonprofit arts organizations in need.

Kaiser will be at the Portland Museum of Art between 9:15 and 11:30 am on July 1 for this invaluable symposium where he will provide counsel and encouragement to nonprofit arts organizations in need. During this free symposium Kaiser will address the key challenges facing nonprofit arts organizations through such areas as fundraising, building more effective boards of trustees, budgeting and marketing.

Tickets for this event are free and must be reserved online at http://artcrisis.eventbrite.com. Seating is limited and we suggest that you reserve your seats early to avoid disappointment. Thanks to the kindness of the staff and leadership of the Portland Museum of Art, all those attending the event will also receive free admission to the Museum for the day.
Complete details of this event, including directions, parking, Museum information, bios and local attractions, can be found by visiting http://mainearts.maine.gov/kaiser.aspx.


At Andersen Studio, we know this well as neither "high growth" private capitalist, nor non-profit organization, we have long been relegated to the economic sector non-creative masses by the authority of Maine's corporate state.

Maine State Tax Debate.

The following was sent via my local Chamber of Commerce. This is the best debate on the tax issue that I have come across .

Proposition 1 facing voters in the June 8 Gubernatorial primary proposes to rescind a major tax revision passed by the Legislature last year dropping the maximum state income tax from 8 1/2% to 6 1/2% but expanding the state's sales tax to make up the lost revenue.


A "YES” vote agrees with Prop 1 - that is, cancels these revisions. A "NO” vote says keep them.

The Boothbay Harbor Region Chamber of Commerce's newly formed Public Policy committee has asked our Local legislators Senator David Trahan (R-Waldoboro) and Representative Bruce MacDonald (D-Boothbay) to explain how these tax revisions will impact on a) economic development, b) small business, c) residents and d) state revenues. Plus list three other critical considerations. Their answers are below.

(Public Policy committee members are Chair Lori Bailey, Wayne Sheridan, Lindy Bragg, Bill Bailey, Lisa McSwain and Hamilton Meserve).

What's the impact of Proposition 1 on:

1. Maine's economic development and attracting investment and good paying jobs?

SENATOR TRAHAN: Question 1 will further depress the job market. I see no positive effect on Maine’s business climate; I see the opposite for several reasons. The new tax reform law creates a disincentive for any business or individual to come to Maine. Contained within the law is a redefinition of residency for the purpose of income. If a person moves to Maine on Jan. 2nd of the tax year they are not eligible for the resident income tax credit. If that person earned an income equivalent to a 2% effective rate, that individual under the new law would have to pay 6.5% with no credit. This welcome home tax is a 350% increase in the income tax, hardly an attraction for anyone.

REP. MACDONALD: The new tax law was carefully crafted to spur economic development. There is no greater impediment to business attraction (and business investment) than Maine’s 8.5% top income tax rate (which is also the capital gains rate). Maine has the 6th highest rate in the nation, and that is often a “show stopper”. The new law will lower this top rate from 8.5% to 6.5% on income under $250,000 and to 6.85% on income over $250,000. In the words of Wick Johnson, President of Kennebec Technologies and a member of the State Chamber Board, “This is a game changer!”

Some people worry that the new sales taxes will negatively impact business, but most economists do not. The sales tax expansion is modest, and over 95% of it is in consumer services not business-to-business services. The modest negative impacts that SOME businesses may see are expected to be far outweighed by the positive impacts on those same businesses (from the extra income in their customers’ hands, as well as their own tax benefits).

The increase in the meals and lodging tax from 7% to 8.5% keeps Maine’s rate at a competitive level, still below New Hampshire and Vermont (which are both 9%), and far below the national average (of 12.5%). Vermont saw no negative impact on business when it went from 7% to 9% a few years ago. In addition, the new law provides over $4 million a year in new money for tourism promotion, which is a proven way to increase business.

2. Maine's small business growth, currently the chief generator of jobs statewide?

SENATOR TRAHAN: Question 1 punishes small businesses with increased costs. Price Waterhouse Coopers did a 2006 study on streamlining the sale tax and found that for a business doing $1 million in sales or less, the cost of administering the sale tax was 13.5% of the tax collected. For a business above $1 million, the cost was 2.2%. Obviously, the costs are much more for a small business, with less opportunity to absorb new costs. Ninety percent of businesses in Maine are small business; worse, every dollar collected must be remitted to the state, who will pay the extra cost? Either the consumer or the business -- neither is acceptable in the current economic climate. Last winter, when Governor Baldacci amended the law to remove ski tickets and golf greens fees from the over 100 new items to be taxed, he cited the negative impacts of taxing these industries. Why is taxing golf and skiing bad for business and the other thousands of small business sales taxes and raising meals and lodging taxes ok for business? The answer is, it is not, except these businesses had no effective lobby.

REP. MACDONALD: Maine’s small businesses will benefit in a big way under of this new law. Almost all of Maine’s small businesses are partnerships, sole-proprietorships, or S-corps that pay business taxes under the individual income tax, and the new laws lowers the individual income tax. The top rate drops from 8.5% to 6.5%, but the effective tax rate drops to far below 6.5% for almost all Mainers. (Despite rumors to the contrary, business deduction are NOT changed by the new law.) In addition, Maine’s capital gains rate drops by about 25%. This will make a HUGE difference to small business owners when they sell their business.

Beyond this, the new law will put $54 million in new money in Mainers’ pockets. (Mainers will see income taxes lowered by $107 million and sales taxes increased by $53 million, for a NET tax reduction of $54 million.) Much of that money is expected to be spent at Maine’s businesses. The State Planning Office conservatively estimates that this will create 750 new jobs, most at small businesses.

Opponents say that it will be a big burden for small business to collect new sales taxes, but their numbers come from a study is that is not applicable to the kind of changes we are making in Maine. In addition, most of the impacted businesses are already collecting taxes on some items.

3. Mainer's disposable income?

SENATOR TRAHAN: Question 1 will only make it worse. Maine is one of the poorest states in the nation with one of the top tax burdens. Our per capita income is somewhere near 36 in the nation and our tax burden as a share of income is 6th in the nation. This law taxes services like, auto repairs, appliance repair and repair of lawn and garden equipment. Who do you think pays the taxes? Certainly not out-of-staters as supporters of this law imply. Mainers also pay the lion’s share of the meals tax. On the subject of out-of-staters, who made them the bad guy, who should pay higher taxes? For every new tax dollar collected and sent to Augusta, it is one less dollar spent in our communities. Maine Revenue Services estimates that for every dollar collected from out of staters, $2 is collected from Maine residents. This new law relies on the concept of collecting $100 million in new sales and income taxes and then redistributing the money in an elaborate credit system. For historical purposes, this fact is important, over the last 8 years, the Maine Legislature and the Governor have, by statute, adjusted taxes, fees, assessments, and credits to raise money over 340 times for a total of $1.6 billion. Do any of you believe this new money will come back without the state keeping a cut? For those who said yes, sorry but the law is designed to do exactly that.

There is a not so clever gimmick buried in the law that eliminates inflation indexing of credits and income tax rates until the year 2014. It is worth noting in 2002 Legislators restored indexing with the intention it occur each year. According to data supplied by Maine Revenue Services, taxpayers lose between $8 and $12 million each year when indexing is removed. Your loss is the State’s gain. Thousands of taxpayers that get a small tax cut in the first year of reform, unfortunately, they will lose the tax cut in subsequent years. MRS reports, for the year 2013 a group of less than 5,000 taxpayers earning over $340,000 will get a net tax cut of $34 million, while the other 99.3% of Mainers who pay taxes will see their bills soar by $8 million. It is true, there are winners and losers in each category, but this new tax code will leave behind a long trail of victims.

REP. MACDONALD: As noted above, Mainers will have an extra $54 million in their pockets in 2011. Opponents of the new law have made a big point of the fact that this amount decreases to about $32 million in 2013 (under current projections) before leveling off after that. However, $32 million is still $32 million MORE than Mainers will have in their pockets without the new law. Beyond that, there is every indication (with the economy beginning to improve) that the increase in disposable income will be higher than $32 million.

According to Maine Revenue Services, 9 of 10 Mainers will have extra money in their pockets in 2011 and at least 8 out of 10 Mainers will have extra money in 2013 (though the situation for 2013 could improve from that). You may see different numbers from some of the opponents of this law, but their analysis has been discredited by Maine Revenue Services (See Free Press, May 20 issue).

4. Maine's government revenue intake?

SENATOR TRAHAN: More money for the state means less money in your pocket. The loss of indexing of income taxes for three years will result in about $40 million in additional tax revenue in 2013 assuming a 2.5% inflation factor in years 2011-2013. In addition, inflation will increase the new sales tax collections by another $7 million, so the law raises about $47 million more revenue than current tax law that will stay in Augusta.

More tax collectors on the trail. The law also keeps $1 million to hire new revenue agents, another $4 million for the tourism fund, and this little jewel. According to Maine Revenue Services estimates, mostly elderly and on fixed incomes will pay more in sales taxes under the plan. It is true that they will be eligible for a tax credit of about fifty bucks, seventy for couples. Of course, these taxpayers will have to file an income tax return to get it. The state is betting many won’t bother. In fact, the tax folks in Augusta have tucked away $5.7 million dollars in the budget based on the expectation that 112,000 Mainers won’t even bother to claim the credit. Obviously, the bill is not revenue neutral.

REP. MACDONALD: The new law is designed to be “revenue neutral,” meaning that it will bring in approximately the same amount of money. (This is confirmed by Maine Revenues Service’s analysis, which extends through 2013.) If these numbers are off and the law takes in more revenue than expected, the law contains a provision to provide more tax relief back to Mainers (by increasing the new household credit) so that it remains revenue neutral.

Some may ask: Why bother to change the tax code if you are going to take in the same amount of money? They are missing the point. Tax reform is all about collecting taxes in a smarter way. Why wouldn’t we want to collect revenue in a way that spurs economic development and at the same time rewards Maine residents and residency? Having a smarter tax code make sense regardless of what budgetary decisions are made in Augusta. There will always be tensions between people who want to see the state spend more and those who want the state to spend less; but that is a separate issue. Regardless of spending decisions (made now or in the future), the state and its residents will benefit from this new law.

What three other factors should Maine voters weigh concerning Prop 1?

SENATOR TRAHAN: Don’t get sick or donate to your local charity - you’ll pay more income taxes. That’s the message in the new tax shift law. The tax collectors in Augusta estimate 81,000 Maine families will pay significantly higher taxes. This unfortunate group is made up mostly of individuals with high deductions for medical expenses, interest expense, charitable donations and property taxes. These deductions are repealed and replaced with a complicated capped credit system.

102 new taxes on the way! If this new law is not repealed in June, the sales tax will be expanded to 102 new items and services. Thousands of small businesses throughout the state will have to start collecting taxes and will be subject to potential new auditing by Maine Revenue Services.

Just the beginning! If this law is not repealed on June 8th, supporters in Augusta will claim Maine people support expanding the sales tax. There are currently $2 billion in sales tax exemptions on the books. This bill is just a foot in the door and the path to an endless supply of money to fund the state budget. We have seen many bills to expand the sales tax further, to items like, newspapers, haircuts, plumbing and carpenter services, legal services and to tax non-profits. If this law is not repealed, who can argue that their industry deserves a pass, while other industries should be taxed? This law is just the beginning and if not repealed with a yes vote on June 8th, expect more of the same.

1) REP. MACDONALD: The new law will help stabilize state revenues during tough times, by broadening and diversifying our tax base. At present, Maine has one of the narrowest sale tax bases in the country. In good years, 40% of sales tax revenue comes from the sale of just two items (new cars and building supplies). This revenue falls off to close to nothing when the economy falls, and we all suffer. We will all see higher property taxes in the future because of the cuts in state aid to education that result when state revenues fall so far. Budget cuts to health care providers including nursing homes and hospitals have a negative impact on our health. This new tax system will help cushion these swings in revenue due to downturns in the economy.

2) The new law will provide tax relief to Mainers. Over 95% of Mainers will see a reduction in their income taxes and over 87% will see a reduction in overall taxes AFTER any new sales taxes are added in. You can see precisely the impact on you by going to the “tax calculator” at Maine Revenue Service’s website at http://www.maine.gov/REVENUE/incomeestate/1040/taxreformindividual.htm



3) The new law is fair, on various levels. First, it is fair to visitors and non-residents, who will still be paying lower sales taxes than in most other states. Second, it is fair to Mainers, by spreading the benefits across all income groups. Some opponents of the law had the audacity to claim that this law is a give away to the rich. This is a completely UNFAIR and UNTRUE statement that Maine Revenues Services has denounced. All income groups benefit under the new law, but low and middle-income people receive slightly more of the benefit, proportionally.

Director of the Maine Department of Innovation describes Mainers as having "blank stares "

Below is copied from the Maine Department of Innovation News Letter which I recently recieved.

Notes from the Director of Office of Innovation

A few weeks ago, Thomas Friedman wrote an article for the New York Times that talked about the importance of a more entrepreneur-friendly environment. He called upon President Obama to make 2010 the year of innovation, the year of Start-Up America. Similarly, Carl Schramm, president and CEO of the Ewing Marion Kauffman Foundation called upon policymakers to promote entrepreneurship to spur job creation and speed recovery. Study after study points out the importance of entrepreneurship to fostering economic growth, as the "carrier of innovation."

Yet here in Maine, suggest that we should assist entrepreneurs and you get blank stares. Solutions such as tax reductions, regulatory reform and greater access to capital, while all helpful, are not sufficient to create the entrepreneurial climate that we need.

Entrepreneurs in the high-growth, high-potential technology-driven start-ups, for instance, often need significant technical assistance in specialized management challenges such as intellectual property protection strategies, equity financing deal structures, transitioning from prototype to manufacturing, market penetration and others. All entrepreneurs benefit from mentors, coaches, peer networks, relationships with university and other researchers, and recognition from their communities.

We simply cannot assume that any one tool such as quality of life or access to capital or business climate will get us the vibrant economy we all want. The experience of countless communities, states and countries demonstrates the need for a coordinated and thoughtful approach to developing entrepreneurship.

Cathy

The Director of the Office of Innovation is a Maine Public Employee.The Office of Innovation is capitalized by the Maine state tax payer. What do you think is meant when the Maine people are described as having "blank stares" on their faces? Does it sound like the speaker can indentify with the people of Maine ?


What do you think the Mainers with "blank stares" might be thinking when the director explains that it requires capital to fund business growth? I wonder if the director understands where the capital used to fund the government agenda comes from?

LD1- A Transference of the Power of Taxation?

Letter submittted to the Boothbay Register
May 2, 2010- I am glad to say that this letter is published in the issue coming out on May 05, 2010.

This article was also published on The Augusta Insider. When The Augusta Insider "merged" with Pine Tree Politics all articles examining state capitalism in Maine were no longer available.

A Call For a People's Veto.
Dear Editor,

I recently submitted a letter, which was also sent to Senator Trahan, who did not respond. This letter concerned the use of taxpayer funding by the Small Enterprise Growth Fund and the proposed LD1 and LD1666. LD 1666 was rejected by the appropriations committee but subsumed into LD1 and then passed unanimously by both the House and the Senate and signed into law by Governor Baldacci.

The Maine Chamber of Commerce describes LD1 as “An Act To Stimulate Capital Investment for Innovative Businesses in Maine”. LD1 is marketed by the Small Enterprise Growth Fund with the following words “This program creates incentives for 20 Million Dollars in the Public Employee Retirement System that have already been targeted for equity investments to be placed in funds that are seeking to invest in innovative Maine businesses.”

I am not a legal expert but such expertise is not required to have general knowledge that when it comes to the law, it is the letter of the law that counts and not external promises or descriptions. When one reads LD1, one will find that in Section 6. Investment goals & guidelines, begins with the words “The purpose of the fund is to invest in a series of high-quality venture capital funds managed to produce a favorable aggregate return among diversified investments, to secure repayment of the amounts borrowed and to minimize the risk of tax credit redemption. Consistent with these investment goals, the board shall give preference to fund managers whose strategies include:

A. Maintaining at least a periodic presence in the State;

B. Actively prospecting for investments in the State;

C. Creating or retaining jobs in the State; and

D. Bringing to fruition the ideas, technologies and intellectual property produced by citizens and institutions of the State. “

The language is vague and suggestive, avoiding specificity and allowing great latitude in interpretation and application. In the phrase “Maintaining at least a periodic presence in the state”, the terms “periodic” and “presence” are left undefined, while the use of the words “at least” permits the “presence” in Maine to be a mere token. The non-existent parameters for retaining jobs in the state can be satisfied by the bureaucratic jobs within the SEGF. As for “bringing to fruition the ideas produced by Maine citizens”, there are no specifics about where and how these ideas will be brought to fruition. Since the current government management of Maine’s economy is invested in technological development and since LD1 Is very arguably a charter for a mutual funds corporation, the language of this bill all too easily enables ideas to be developed in Maine and brought to fruition in countries with low labor costs and minimal environmental restrictions, which produce that “quality” investment in the context of the profit motivation of mutual funds

The bill defines “lender” in such terms as would be otherwise be signified by the term “investor”. The preferred “lender” is The Maine Public Employees Management Fund, which, at first glance, has stricter investing requirements than are written in LD1. If the Maine Public Employees Management Fund declines to invest, “the Fund of Funds” can seek other investors.

In section 9, Audits and Reports, LD1 is suddenly written in very specific terms. Section 9 deals with the relationship between the director of “The Fund of Funds” and the SEGF . Section 9 leaves nothing to interpretation when it specifically defines the length of time that constitutes a period, showing clearly that the writers of this law know how and when to be specific.

One instance in which LD1 is very specific is in Section 7, Investment Restrictions, where the exact words are “The fund may not invest directly in individual businesses but only in venture capital funds…” And yet in promoting this bill it is specifically described as a bill to create funds for “innovative” Maine businesses. Other than a requirement to invest 30,000.00 annually in the Maine Patent Fund, there is no specific wording in this bill that requires more than a token investment in businesses located in Maine.

The SEGF promotes this government chartered mutual fund as a means to take the burden off the Maine taxpayer, when in fact it takes the burden of failure off the SEGF and the individual or institutional investors in ” the Fund of Funds” and places it on the Maine Taxpayer in the form of a “tax credit”, which has no specific relationship to “tax payer”. The “tax credit” is guaranteed by a certificate, for which the letter of the law provides no specific requirements or caps, leaving it solely to the discretion of the SEGF. The tax credit will be used to cover any shortfalls that the Fund of Funds runs up against and is said to be legally binding according to Article One, Section 11 of the Maine State Constitution.

I have to question whether the certificates can be legally binding on the Maine state taxpayer because LD1 states “The board (The SEGF) may raise capital for the fund by offering as security certificates issued by the board.”

The SEGF does not have a government website, which suggest that it is a private corporation which has been enabled by our legislature to advance it’s causes using taxpayer dollars to it’s advantage. Section 9 of the Maine State Constitution- Power of taxation, states “ The Legislature shall never, in any manner, suspend or surrender the power of taxation.” A private corporation cannot make binding agreements for the Maine State taxpayer. By obligating the taxpayer to cover shortfalls within the SEGF with “tax credits”, it is implied that taxes will have to be raised as a means of financing the “tax credits”- as needed.

The language of LD1 is very murky about identifying the authority that is granted power to define the terms of the “certificates” backed up by “tax-credits”. It is the job of the legislature to establish the terms of contract, but in the case of LD1 these terms are left undefined- or worse deferred to the SEGF in the following:

1. Credit allowed. A lender to the Maine Fund of Funds as defined in Title 10, section 396, subsection 5 is allowed a refundable credit against the taxes imposed by this Part in an amount certified by the Small Enterprise Growth Board as established under Title 10, section 384 as equal to the shortfall in scheduled payments on debt incurred to provide capital to the Maine Fund of Funds.

If the authority to define the terms of agreement remains with the legislature, then the legislature has granted itself the authority to negotiate business contracts, which belongs to the executive branch of government. The Maine State Constitution, Article IV, Section 14 states “Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature…” Our legislature seems to believe that it can get around the Maine State Constitution through carefully parsed language and that a corporation by another name is not a corporation.

Based on the LD1 vote, all incumbents should be voted out of office. This Act was passed by “the Rule of the Gavel” where by there is a call for objections and if there are none, all are considered to have voted yes.

Article IV, Section 18 of the Maine State Constitution outlines the process by which the people of Maine can veto bills passed by the legislature. There is a 90-day window of opportunity after the close of the legislative session. In LD1. the taxpayer carries the risk but not does not share in the gain. I have created a Facebook page, “Maine Citizens Against Government Chartered Corporations” to find out if there is enough support among the Maine people to warrant initiating a People’s Veto.

An additional effect of mobilizing a People’s Veto is that it would force government-chartered corporations as an election campaign issue. We know that all incumbents are supporting government chartered investment corporations but thus far, to my knowledge, none of the other candidates for state positions have spoken out on this issue, offering no guarantee that electing a non-incumbent would have any effect on moving back toward a constitutional separation between the state and the capitalistic corporation.

I have written on this subject for the online magazine, The Augusta Insider, under the title, “Socializing the Risk and Privatizing the Gain” This article provides links to the bill and the statute used to authorize it. I hope to encourage an open dialogue about what the actual letter of the law legitimizes and to encourage the citizens of Maine to become more actively involved in reading the bills being passed by our legislature rather than accepting the promotional words about said bills at face value, without further examination or debate. The Maine State constitution needs to be included in that debate.





Sincerely



Susan Mackenzie Andersen

East Boothbay, Maine

Mackenzie is a new contributor at Augusta Insider

As of yesterday I am a new contributor at Augusta Insider. The Augusta Insider is a forum that attempts to represent a cross section of Maine politics and culture.

I have invited Senator Trahan to respond to my Open Letter withing that forum.

A personal story about an encounter between the private economy and the government/non-profit sector

I don't usually publish articles so soon in succession, and I had reservations about going public with my personal story, but learning about the new legislation recently passed, I am on fire- and, Oh well, what the heck!

This posts follows the post Who Benefits and Who Pays for Maine's Big Government, where I have explained my objections to LD166 in more detail

Dear Senator Trahan,

Regarding the “tax credit” being offered to tax exempt organizations that “invest” in Maine businesses. Maine is a state in which government jobs are growing at faster rate than the private sector, understandably since the private sector's self generated profits, which also function as it’s “roll-over capitalization” are being extracted to fund big government and all those to whom big government is distributing special favors, including the non-profit sector, as it excludes the micro-economy.

A few years ago, I became acutely aware of the function that non-profit organization play in wealth redistribution and why our state government maintains such a close bond with the tax-exempt sector of our economy. This was when I was invited to a “networking “ meeting by the non-profit ceramic workshop, Watershed. Watershed is located just off the Boothbay peninsula and is situated in close proximity to the “cluster industry” of ceramic studio productions that have sprouted up in the Boothbay Region since my parents first pioneered the concept in the mid-century. My father had long expressed the idea that the ceramic studios should form a network that is mutually supportive, and so upon receiving the invitation, we took it to be coming from such a place, sub-consciously ignoring the other message, which was that the meeting was a “celebration” of Watershed’s project, called something on the order of the “mudfest”. This is not quite right but the name incorporated the word “mud”, which I later found to be quite apropos.

Upon attending the meeting I learned that this was a project funded by a matching fund from Governor Baldacci. The grant was for teaching people to make ceramic mud pies, about which I kid you not and am not exaggerating in any way. The small dish that Watershed was teaching people to make looked exactly like an ordinary attempt by a three year old to make a ceramic dish. It had no grace, style or idea beyond that. In plain language, it was ugly and unimaginative.

I suspect that the content of what Watershed was teaching had no import to our governor. He recognized that with the governor's agreement for a matching fund, that Watershed would easily find others to invest in their project of teaching the public to make ceramic mud pies. This became clear to me as if a light had suddenly been turned on. Non-profits are instrumental for attracting capital into the state. It matters not the quality of what they are doing, only their non-profit status matters because this allows then to accept donations- and this also enlightens LD166 and it’s inclusion of non-profits in the tax credit, which for that purpose, only, they will be treated as taxpayers. This is incentive for non-profits to procure money to invest in the government-favored sector of the economy.

The speakers at Watershed said they had a plan for expanding the teaching of mud pie making, hoping to involve all who were in attendance. I seemed to be the only representative of the private economy. I asked why would we have special classes when we already train people on the job. The response was that since Andersen Design is already well known, we do not need any publicity. I was astounded but I continued to try to listen. However I could no longer hold my tongue when the discussion turned to how much they could charge the public for the mud pies. The only criteria were what they might expect the public would pay.

There was a young woman, who looked no older than twenty, I will call her Jane. Jane had received a grant of five hundred dollars to give workshops in mud pie making. She had come up with a brilliant marketing concept. Instead of charging for the mud pie, she would charge for the event and give the mud pies away as part of the event. She clearly perceived the true value of the mud pies.

Finally I could no longer hold my tongue and I spoke about how, if one were in business one would have to calculate the price by cost and that one would also be in competition with imported goods made in countries with low labor costs and practically no environmental regulations. I saw in the eyes of the young people that they were very interested in what I was saying but when I finished, one of the older women associated with Watershed, told me that they are not interested in what I had to say, they are interested in what Jane has to say. At that point I had had enough of this madness and left the meeting.

I come from a family that started an influential and globally recognized ceramic art, design and slip-cast production business, over half a century ago but, in the eyes of Watershed, what I had to say was of no value in comparison to a twenty-year-old novice. This attitude that is consistent with my interactions with the non-profit-government community since "the creative economy" movement was initiated by Governor Baldacci.

I learned that it is common practice for Watershed to charge students for classes, permit them to keep a couple of the pieces that they make, and then have a benefit for Watershed where by they sell off the rest of the work. So while the private economy's, slip-cast, “cluster industry”, has been providing training in genuine ceramic skills, at our own expense; non-profits have been receiving grants to give classes. Some of these non-profits may be giving classes in valuable skills, but I saw no level of skill required in the Maine state government-funded project of Watershed. So while the private economy has to pay into the system that covers workers rights, Watershed does not, and while the private economy has to pay it’s employees as part of our production over head, Watershed actually charges students to make work that Watershed then sells for it’s own benefit.

I thought at first that the purpose of the classes was to train people in skills that they might use to develop a livelihood, but in that I was mistaken. Jane was required to give the profits she made to a charity. She chose a soup kitchen. The profit she made equaled the amount of the grant she received. I never learned who covered the cost of the overhead for firing the pieces. The non-profit, Watershed, believes it is doing “public good” by providing charity for the poor. As a representative of the private economy sector, I believe that we do “public good” by providing jobs.

This story is just one of many that I could tell about my encounters with the government-nonprofit community. I have tried to keep an open mind but I have found that the attitudes expressed here in are typical of the attitude that the government-nonprofit sector has toward the private (micro) economy sector, which provides the underlying funding for the government-nonprofit sector. To use a popular word. This is “unsustainable” economics.

FYI, there will be an article on Andersen Studio in the upcoming Maine Boats and Harbors, written by my nephew, the author and journalist, Colin Woodard. We will also be featured in the next issue of Atomic Ranch, a quarterly magazine from Oregon on mid-century design.