State — not cities — needs to fix budget

Posted Jan. 08, 2010, at 7:08 p.m.

The governor’s recently released proposed supplemental budget includes a number of recommendations that, if enacted, will have serious and wide- reaching effects on local government.

The Bangor City Council is strongly unified in opposition to the proposed reductions in the state budget that shift the tax burden to the taxpayers of our community. The budget seeks to reduce local government aid programs, such as municipal revenue sharing, state aid to education, and state reimbursement for General Assistance. Additionally it will defer payments owed until subsequent fiscal years and further reduce aid to individual homeowners and renters by lowering the eligibility threshold for the Circuit Breaker program.

While the end result of the proposal is a balanced state budget, the proposal relies heavily on one-time funds and deferment of payments to the next fiscal year. A significant portion merely shifts taxes from one level of government to another.

In a Nov. 13, 2008, publication, J. Scott Moody, chief economist of the Maine Heritage Policy Center, noted that Maine ranks 41st in local government spending burden, 19th in education spending, and 5th in state spending. This report clearly demonstrates that local governments are efficient and frugal with taxpayers’ dollars.

Revenue sharing is the conduit through which all local governments receive a small portion (5 percent) of total state income and sales taxes. Due to the recession and falling state tax receipts, Bangor expects to lose about $435,000. The proposed supplemental budget seeks an additional $467,000 reduction to Bangor. The effects of both reductions fall in the city’s budget year that ends June 30, 2010, which is already half over.

Next year, the recession-related reduction in revenue sharing is predicted to be in the same range ($390,000), and the proposed supplemental budget includes redirecting another portion of sales and income tax away from local governments. Bangor expects yet another reduction of approximately $580,000. Thus, if the proposals and predictions hold, Bangor could face revenue decreases of $ 1.8 million to $2 million over the next 18 months in the municipal revenue sharing program alone.

General Assistance is a state-mandated program that provides assistance to those in economic need. The funding levels of this program are completely controlled by the state. The reimbursement received by local governments covers only a portion of the direct assistance and does not contribute to the administration of the program.

By adjusting the payment formula, Bangor’s reimbursement is reduced by an estimated $550,000 for FY 2011. This represents an underfunded state mandate and tax shift of $1.88 million affecting only 12 communities in the state.

Earlier this year, state aid to Bangor’s schools for FY 2010 was cut $754,000. The proposed supplemental budget potentially reduces next year’s state aid another $1.5 million to $2 million.

In 2004, Maine voters overwhelmingly passed a referendum that requires the state to provide 55 percent of the cost of local education. After a great deal of effort spent developing a funding model, the proposed budget contradicts and then undoes this progress.

For this fiscal year, now half over, Bangor will lose well over $1 million in state funding. And if predictions for natural reductions occur, the number could top $1.5 million. For next year, the number for both state-proposed and natural revenue reductions may exceed $3.5 million if the economy does not rebound quickly. For illustration purposes, this amount translates into a potential tax rate increase of $1.40 per $1,000 of assessed valuation.

We recognize the impact of the recession on our residents and on state revenues. We are prepared to do our part, as we did this year when we severely cut our budget to maintain the same tax rate.

The city’s current budget situation and FY 2011 budget process will be extremely difficult and challenging. Very painful decisions must be made by all involved. Service levels, programs, and personnel will be under a level of scrutiny never seen in the past. The city may not be able to provide all the services that residents have come to expect and enjoy.

We would urge residents to become familiar with the proposed supplemental budget and the effects that it will have on Bangor and all Maine communities. Communicate your concerns to your legislators in Augusta and join us in demanding that these proposed reductions be restored. The state’s budget problems should be dealt with in Augusta, not balanced on the backs of Bangor residents and other Maine municipalities.

This commentary was written by the Bangor City Council: Richard Stone, chairman, and Councilors Patricia Blanchette, Richard Bronson, Geoffrey Gratwick, Susan Hawes, David Nealley, Gerry Palmer, Cary Weston and Harold Wheeler.

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