🔒Gearing up

LePage lays out priorities

• Energy costs, work force issues highlighted
• Talk of pension reforms fuels questions

Gov. Paul LePage says the next legislative session will be all about helping business flourish and creating jobs.

Using a speech to the Augusta Kiwanis Club to set his broad priorities for the January session, LePage said energy costs in Maine are too high for both businesses and individuals, with electricity rates, for example, 42% higher than the national average."Energy is a major, major area that is hindering our ability to prosper in the private sector," LePage said. "It's also a major hindrance for people to just prosper, period, because it's so expensive to heat homes, to provide electricity in homes."

The governor also stressed that natural gas use should be expanded in the state, with large companies acting as anchors on pipeline spurs that will eventually allow for residential use. "We are gearing up now to talk with all of the natural gas companies. We want them to come in and talk to us about what we can do to get them to invest in the state of Maine," LePage said.

He said without lower energy costs, businesses will not move to Maine, and existing companies will find it difficult to expand. "You wonder why businesses, particularly manufacturing [and] food processing, say Maine is too expensive to do business in," LePage said. "I've had two, just in the recent months, tell me, 'Get control of your energy costs and then we can come to Maine.'"

Another impediment for employers is the lack of a skilled work force, he said. The state needs to encourage not only more engineers and other jobs requiring a four-year degree, but also more workers in the skilled trades such as carpenters, electricians and plumbers, LePage said.

The governor also encouraged further tax reform in Maine. Taxes on pensions are driving Mainers to move to other states and he wants to keep them, and their money, in Maine, LePage said. He gave no details about the reforms he's proposing, concerning some lawmakers.

Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the taxation committee, said if LePage wants to remove all taxation of pensions, the committee has been told that would cost at least $65 million.

DOL disputes fraud findings

• Feds report problems in unemployment system
• Winglass buckles down on benefit cheats

Maine Labor Commissioner Robert Winglass is disputing federal labor department figures showing errors and fraud in Maine's unemployment system amounted to $33.6 million last year. He says the actual number is just over $6.5 million, but pledges to bolster efforts to reduce mistakes and target fraud.

"That has been my top goal since I came through the door here," Winglass said. "We have been looking very, very hard at the fraud situatiton."

The federal figures, for the period from July 2010 to June 2011, were based on estimates, according to Laura Boyette, director of Maine's Bureau of Unemployment Compensation. She said the actual numbers for the period reflect $5,186,120 in errors and $1,333,511 in fraud. The fraud was perpetrated by 773 individuals, about 1% of the total Mainers who received benefits during that period.

"In Maine, one of our primary reasons for overpayment is individuals not doing or performing an adequate work search," Boyette said. "That always results in an overpayment because we can't assess that until the next week."

A significant number of overpayments also occur because individuals go back to work and do not immediately notify the bureau, she said. "It can be five weeks before the computer match from the new hires database catches that error," she said.

But it is fraud that has Winglass the most concerned. He said cases where individuals deliberately seek to cheat the system are a high priority for the agency. His department will hire at least one more fraud investigator and the Maine State Police have agreed to provide additional training for fraud investigators, he said. "Hopefully before Thanksgiving we are going to have under way some prosecutions of some pretty significant fraud cases that we have identified," Winglass said.

Unemployment benefits are funded by a tax on employers, and there was surprise and concern in the business community when the federal findings were released. "I was, frankly, shocked and alarmed at the original federal numbers," said David Clough, Maine state director of the National Federation of Independent Business. "It's nice to know it is not as bad as first portrayed, but it's still something that concerns employers."

In 2010, Maine employers paid $132.9 million in unemployment insurance. "In the area of unemployment insurance, and in the area of workers' compensation insurance, I don't think employers have ever received the level of scrutiny they are entitled to around the area of fraud," said Peter Gore, vice president of the Maine State Chamber of Commerce.

Revenues improve in August

• Income taxes top projections
• Sales tax remains a worry

After a disappointing start to the budget year, revenues improved in August but remained under budget by $10 million. Finance Commissioner Sawin Millett says while that's good news, he remains concerned about sales taxes in a soft economy.

"Early information indicates that we will continue on target for September, but we won't know for certain for a couple of weeks," Millett said. "The sales tax area is one that bears a real close watching as we see the September numbers."

The sales tax is divided into several categories, and a key indicator of consumer spending, general merchandise, is running below 2010 numbers, he said.

Income taxes, both individual and corporate, beat projections in August and helped reduce the shortfall, he said. So far in September, both appear to be on target or performing a little better than projected, Millett said.

Sen. Richard Rosen, R-Bucksport, co-chairman of the appropriations committee and a retailer, shares Millett's concern that consumers still aren't confident in the economy and are not spending as projected. "We've looked overall at the back-to-school sales figures nationally and they were weak, and I am now reading the projections for Christmas sales and it looks like they will be very soft," he said.

Rep. Emily Cain, D-Orono, the House minority leader and former co-chair of the panel, said the only certainty about the recession and its aftermath has been uncertainty in revenues. "I think we have to carefully watch all sources of revenue and look into the details of what is happening in the economy," she said.

The largest tax source is the individual income tax, projected to bring in $1.445 billion this year. It was below estimates in July and above in August by $3.7 million, most of that in withholding.

Millett said he is also concerned about the taxes on tobacco products. The fourth-largest source of state funds, those taxes are projected to bring in $143.6 million this year. Revenues have fallen short for the first two months of the year and Millett believes that's due in part to New Hampshire lowering its tobacco taxes as of July 1.

Mal Leary runs Capitol News Service in Augusta. He can be reached at editorial@mainebiz.biz. Read more of Mal's columns here.