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Maine Governor Pocket Vetoes Fund of Funds Legislation

“I recognize the importance of attracting venture capital and new investments to Maine,” Gov. John E. Baldacci said. The governor later added, “However, as it is currently written the bill carries enormous risk. This bill would guarantee a rate of return for venture capital investors while Maine would shoulder all the risk. The potential liability for the State is too great for me to sign this bill.”

By not signing the bill, Gov. Baldacci pocket vetoed LD 2320, entitled "An Act To Stimulate Capital Investment for Innovative Businesses in Maine.” The act would have created a Maine Fund of Funds program within the state’s Small Enterprise Growth Board to increase availability of venture capital.

Modeled on statutes in Arkansas, Iowa, Michigan, Montana and Utah, LD 2320 authorized up to $80 million in refundable tax credits to capitalize the fund. No more than $10 million in tax credits could be redeemed in a single year; however, the fiscal note for the legislation determined the maximum potential loss in revenue to the state for any one fiscal year could reach $18.96 million.

The legislation permitted the Small Enterprise Growth Board to hire a director, who in turn had the authority to invest outside Maine to minimize the risk to the state of the tax credits actually being redeemed and to maximize returns.

That balance between local economic development and maximizing returns to investors is a perennial challenge for public efforts to increase access to capital, SSTI found in its research for A Resource Guide for Technology-based Economic Development.

Gov. Baldacci isn’t opposed to identifying a better model, however.

“This idea deserves more investigation and discussion and holds the potential to be a new economic development tool,” the Governor said as he withheld his signature from the bill.

LD 2320 is available at: http://www.mainelegislature.org/legis/bills/ld.asp?ld=2320

A Resource Guide for Technology-based Economic Development may be downloaded as a PDF at:
http://www.ssti.org/Publications/Onlinepubs/resource_guide.pdf.

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Copyright State Science & Technology Institute 2008. Redistribution to all others interested in tech-based economic development is strongly encouraged. Please cite the State Science & Technology Institute whenever portions are reproduced or redirected.

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