AUGUSTA — Gov. Paul LePage’s proposed $6.3 billion two-year state budget would balloon property taxes, slash municipal services and make Maine businesses less competitive.

That was the message delivered to the Legislature’s tax and budget-writing committees Wednesday by more than 100 local officials, businesses and others affected by the governor’s plan.

The daylong public hearing is one of several scheduled by lawmakers, who are beginning to dig into a controversial budget proposal that will further test the Democratic-controlled Legislature’s ability to work with — or around — the Republican governor.

Wednesday’s hearing centered on four of the governor’s most contentious proposals, including a provision to suspend municipal aid for two years and save the state more than $200 million.

The revenue-sharing plan represents 34 percent of the savings initiatives in LePage’s budget and is one of several measures LePage has proposed to protect a $400 million tax-cut package enacted by the Legislature in 2011.

The municipal aid proposal has drawn the most attention since the governor unveiled his budget in early January. Democrats and municipalities have described the proposal as effectively a tax shift from the state to towns.

That message was repeated often Wednesday as municipal officials lined up to describe the projected effects on their communities.

The afternoon hearing also included testimony from some of the state’s largest businesses opposing LePage’s plan to eliminate the Business Equipment Tax Reimbursement program, or BETR. The governor wants to replace the 1995 program with the Business Equipment Tax Exemption, BETE.

Both programs reimburse businesses for taxes paid to municipalities on equipment investments. Many business representatives who testified Wednesday support the transition to BETE because it maintains a higher reimbursement rate than the older program. Their opposition stems from the governor’s plan to suspend BETR payments for one year, a proposal that would cost businesses participating in the program a combined $38.8 million.

According to budget documents prepared by Maine Revenue Services, the measure would save the state $11.8 million.

The effect varies from business to business depending on their equipment expenses.

On Wednesday, large and medium-sized businesses appeared before the committee to protest the one-year suspension.

Maine paper companies, among the heaviest users of the program, according to Maine Revenue Services data, were united in opposing the measure. Verso Paper, with mills in Bucksport and Jay, received more than $4 million in reimbursement in fiscal year 2012. Bath Iron Works got $3.4 million in reimbursements last year, and National Semiconductor received $1.9 million.

Both companies testified against the proposal, as did Tambrands ($1.3 million), Fairchild Semiconductor Corp. ($552,000), Unum ($330,000), B&M Baked Beans ($75,000) and Texas Instruments (75,400).

Ed Snook, with B&M, said the program leveled the playing field with other states. Suspending the reimbursement even for a year could be viewed as a tax increase by B&M’s parent company, B&G Foods Inc., possibly resulting in job cuts, he said.

The argument was repeated by more than a dozen businesses and their advocates, including the Maine State Chamber of Commerce and Portland Regional Chamber of Commerce.

Several argued that that the proposal created unstable tax environment

David Brenerman, government affairs officer at Unum, said an unreliable tax system and reneging on the state’s commitment to the program could make “businesses less inclined to invest in Maine.”

The equipment reimbursement also would cost Maine municipalities an estimated $10 million, according to budget documents.

The proposal is paired with the municipal revenue-sharing suspension and repealing the homestead and circuit-breaker programs for homeowners. The homestead exemption applies to people who have owned a home for a minimum of a year and exempts from taxation the first $10,000 of property value.

The circuit-breaker program pays a $1,600 refund to low-income homeowners and renters.

The Maine Municipal Association, which has opposed the governor’s budget actively since it was released in early January, has said the combined effect is a $420 million tax shift to towns and cities.

The plan has not been embraced warmly by Republicans or Democrats. However, some Republicans have suggested that towns need to do more to share or consolidate services with their neighbors.

The idea was rejected soundly Wednesday.

Kathy Littlefield, a Waldo selectwoman and member of the Waldo County Municipal Association, said the combined effect of the governor’s proposals would result in a $5.8 million tax increase to Waldo County towns. Littlefield described consolidation talk as “rubbish.” To the “belt-tightening” argument, she said, “we have tightened our belts so much there is no belt left. We are right up against the buckle.”

Sanford Mayor Maura Herlihy said she was a registered Republican who stood to benefit from the income tax cut that the governor’s budget is designed to protect. She said she’d gladly give it up to avoid a “tax shift.”

Steve Mistler — 620-7016
smistler@pressherald.com
Twitter: @stevemistler

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