AUGUSTA, Maine - Maine's non-profits turned out at the State House today for an informal meet and greet with lawmakers, and a chance to highlight their contributions to Maine's economy.
For example, the groups collectively employ nearly nearly 85,000 Maine residents who are paid more than $3.6 billion in wages. But their bottom lines could look a whole lot different in the future if Gov. Paul LePage's plan to require municipalities to start taxing them is approved.
Members of the Maine Association of Nonprofits set up tables around the Hall of Flags and passed out brochures highlighting the services they provide to the state. Although they are non-profits by definition, the groups pack a big punch to Maine's economy, which the association pegs at about $10 billion annually in wages, retail and wholesale purchases, and contracts for professional services.
None of the non-profits pay property taxes in the communities where they are located. But that would change under Gov. Paul LePage's budget, and non-profits large and small have taken notice. Darlene Trew Crist is the director of communications for the Bigelow Laboratory for Ocean Sciences in East Boothbay. She estimates that LePage's plan could cost Bigelow as much as $165,000 annually.
"We'd have to figure out some way to bear that unreasonable burden because we just don't have any way to recoup it," Trew Crist says. "If we were a real business, we'd have some product to sell - but we do science."
LePage's plan is an effort to cushion the loss of municipal revenue sharing funds in the second year of the budget cycle. The $60 million the state would have paid to Maine cities and towns would be invested elsewhere in the budget.
But the governor would lift the current property tax exemption for all non-profits, with the exception of churches and religious organizations. Under the plan, cities and towns would have to impose a tax assessment on any non-profit property equal to 50 percent of total valuation exceeding a half-million dollars.
Trew Crist says the proposed policy seems to ignore the fact that tax exempt status is one of the big reasons that Bigelow can provide an $11 million payroll for 84 employees who reside in the Mid-coast area. And she says that's not all Bigelow does for the region.
"We just opened a brand-new facility in East Boothbay," Crist says, "and when we did that we had an independent economic analysis done that said by 2017 we would have contributed $17 million in direct and indirect benefits to the community. And we don't want to threaten that with this tax proposal."
"There's a ripple effect out of non-profit employment and that's the challenge with this particular proposal," says Scott Schnapp, executive director of the Maine Association of Nonprofits.
Schnapp is preparing for some lengthy public hearings before the Legislature's Appropriations and Taxation committees, where the fate of the governor's budget will ultimately be determined. Schnapp says most non-profits would have to look toward laying off employees to offset significant unexpected new expenses.
"So when you add expenses you're going to have to cut expenses somewhere to be able to balance budgets," he says, "and the cuts are going to have to come on the employment side."
Not only would the policy result in job losses, some critics say the intended policy would never come close to making up the difference to municipalities for $60 million in lost revenue sharing funds. Geoff Herman is the director of state and federal relations for the Maine Municipal Association.
"What is being offered with the tax base of tax-exempt organizations, the way it's being provided with these thresholds and you only get half the base, is about half that," Herman said.
Republican support for taxing nonprofits has been muted, with many GOP lawmakers saying they need to to see more details of the proposal. Meanwhile, Democrats, such as Rep. Adam Goode, the House chair of the Taxation committee from Bangor, are beginning to line up to oppose lifting the exemption.
"I think it's unfair to the nonprofits," Good says. "They provide a major service to our community and they're dragged into a fight because of the governor's disinterest in funding revenue sharing."
According to a Wall Street Journal analysis, Maine ranked fifth in the country in 2012 at 51 percent when it came to reliance on property taxes to fund government. By contrast, the national rate that year was 21 percent lower.