Changing the way Maine does business How can we avoid the Insider Problem? The Phoenix proposes some government reforms BY LANCE TAPLEY

PART THREE OF THREE: BUSINESS AS USUAL IN THE ERA OF BALDACCI?

The business of conducting business with government in Maine is often a very cozy affair. Two recent stories I’ve written suggest just how intimate it can be.

• On April 15, I examined how Augusta’s mayor helped arrange for the State of Maine to distribute almost $400,000 in federal funds to the City of Augusta so the city could grant it to the real-estate company of which he is the chief operating officer.

• On April 29, we looked at how this company, Harper’s Development of Winthrop, owned by some of Governor John Baldacci’s foremost campaign contributors, has emerged as a major landlord for state agencies.

In the days and weeks that followed, more than two dozen emails and phone calls came to me and the Phoenix from around Maine, a significant number of them asking us to look into perceived conflicts of interest of government officials.

If those communications are any indication, it’s clear that many people are distrustful of their government. That’s no news to anyone who has sat through city council meetings and legislative hearings. Many citizens commonly believe that a group of businesspeople and politicians who are in bed with each other — the insiders — run everything in a city or a state.

It’s clear Maine needs to change the way it does business. At the municipal level, we need to make codes of ethics standard practice, to make clear what elected officials can and cannot do on behalf of their day-job employers. At the state level, we need anti-"pay to play" legislation so that even the appearance that elected officials are rewarding campaign contributors with government contracts is eliminated.

Ethical problems involving government and business — real or perceived — are not exclusive to Maine. Lately, New Jersey has been rocked by a scandal involving publicly awarded contracts. In the 1920s, there were the scandals called Teapot Dome, when oil fields were improperly leased during President Harding’s administration. More recently there were the multi-level scandals involving Enron. Throughout American history, a well-connected business elite has seized opportunities to make money at the expense of taxpayers. Call them what you will, favoritism or inside deals destroy a basis of democracy, the fair and equal treatment of all citizens. We are not equating these Maine cases we’ve written about with scandals on the level of Teapot Dome and Enron, but even when the Insider Problem is more a perception than a reality, such a perception is highly corrosive to the faith in government that also is an underpinning of democracy.

Historically, the Insider Problem is exacerbated when government is especially pro-business — for example, the robber-baron Gilded Age of the late-19th century and, in the 20th century, the Roaring Twenties. In a capitalist society, of course, government is routinely pro-business. But the Progressive Era followed the Gilded Age, and the New Deal followed the 1920s. In other words, at some places and times, government has shown that it can be critical of and regulate business practices; government can reflect the understanding that the interests of citizens and corporations don’t always coincide.

Maine in 2005 does not appear to be one of those places and times. The Baldacci administration is extremely pro-business, and the governor sets the state’s governmental tone. The head of the Maine State Chamber of Commerce, Dana Connors, is a close Baldacci ally. In addition to the governor’s creation of virtually tax-free Pine Tree Development Zone sites, which now number over 100, he has strongly supported many other corporate tax breaks and other corporate assistance. While he and legislative majority Democrats have cut back social services, they have presided over the ever-expanding Business Equipment Tax Reimbursement program (BETR), which now gives $70 million a year to corporations such as Wal-Mart.

Just in the past few weeks, Baldacci has proposed special tax breaks for developers of sizeable rural hotels and the repeal of the business-equipment tax — while, with the Democratic legislature, he has approved a historic and controversial $450 million in borrowing to cover the gap between the state’s tax revenues and operating expenses. The Baldacci administration justifies its actions with an appeal to classic Republican, trickle-down economic theory: Cut taxes on the rich and the corporations and they will have more money for investment, which will provide jobs — that ultimate political justifier.

Historically, when the Insider Problem exists in an atmosphere of largesse to the rich and their corporations, "It’s a Gold Rush-spiral mentality," according to Craig Holman, campaign-finance-reform chief for Public Citizen, the national consumer-rights group.

A Gold Rush mentality can be defined as "anything goes" in the scramble to get rich or richer. Holman sees this mentality operating now in Washington, taking note of the enormous corporate contributions flowing to the tax-cutting Republican Party. One result? Mainer Chellie Pingree, president of Common Cause, another national reform group, comments on the atmosphere in the nation’s capital: "It isn’t a very good time in Washington in respect to issues related to ethics in government."

But putting aside many huge questions about what happens when corporate welfare and campaign contributions are mixed in a rich stew, the Insider Problem can be addressed discretely. To some extent, it already has been in Maine. We have state conflict-of-interest laws, legislative lobbyist-disclosure rules, state-office-candidate campaign-contribution limits, and public campaign financing for legislative and gubernatorial candidates.

But there are reforms we don’t have that would squarely address the Insider Problem.

A CODE OF ETHICS FOR MUNICIPAL GOVERNMENT

A municipal ethics ordinance probably would have prevented Augusta Mayor William Dowling’s controversial activities discussed in Part One of the Phoenix’s series. Augusta and many other Maine cities and towns don’t have one (Portland does not, for example), but a few do. Bangor and Auburn have elaborate ethics codes in their ordinances, including stringent conflict-of-interest rules covering city officials, including councilors. In these cities, boards of ethics may rule on ethical questions. In Bangor, penalties for violations may include fines, censure, and dismissal.

In regard to the city’s dispensing of money, Bangor’s ethics code states: "No City employee, City Councilor, board member or commission member shall participate directly, by means of deliberation, approval or disapproval or recommendation, in the purchase of goods and services for the City and the award of any contracts with the City . . . where to his or her knowledge there is a financial interest, or special interest other than that possessed by the public generally, in such purchase or award." The prohibition covers the official and his or her family, and "interest" includes when the official has "a supervisory or managerial position" in a business.

The Bangor code also explicitly says, "No City Councilor shall either appear on behalf of any third party interest before any City agency or represent a third party interest" in any city matter.