AUGUSTA, Maine — Both state and local governments are complying — but with varying degrees of success — with a 5-year-old law limiting the growth of government spending, according to a report released Wednesday.
In 2004, voters passed a referendum known as “LD 1” that aimed to reduce property taxes and Maine’s total tax burden by increasing state aid for education, while setting limits on annual spending at the state and local levels.
An annual report issued by the State Planning Office said that roughly 71 percent of municipalities stayed within their property tax growth limits in 2009, although smaller communities had a tougher time than larger municipalities.
Statewide, property taxes rose by 2.5 percent in 2009, less than half the growth rate in the three years before passage of LD 1. But 38 percent of towns with fewer than 2,500 residents exceeded the limits, compared to just 15 percent of larger communities.
Additionally, state spending decreased by 3 percent for fiscal years 2009 and 2010 because of the recession.
Maine’s school districts had a more difficult time staying within the restrictions established by LD 1, with 87 percent exceeding their spending limits. Officials in the Baldacci administration used the report to call for more efficiency at the local level, such as the controversial mandate for smaller school districts to consolidate.
“Larger towns and larger school districts have an easier time staying within LD 1 limits because they have the scale to operate efficiently,” Martha Freeman, director of the State Planning Office, said in a statement. “Particularly in a recession, it’s important that we continue to find ways to consolidate and coordinate the way governments provide services.”
Kate Dufour, who handles legislative issues for the Maine Municipal Association, said the report shows, once again, that towns and cities are largely complying with the spending limitations enacted by voters.
She was not surprised the smallest towns struggle more. Dufour said small towns are often “bare-bones operations” with a handful of employees, at best, so even a single incident such as a broken-down plow truck can bump local spending above the limit.
Dufour said she believes LD 1 has helped raise awareness among town residents about the budget process as well as the link between state and local taxes and how property tax revenue is spent.
“The surprise is even as state resources are trickling in these days, [municipalities] are still able to stay within these limits, overwhelmingly,” she said.
The nexus between state spending and local property taxes is once again receiving considerable attention in Augusta as lawmakers debate Gov. John Baldacci’s plan to cut $438 million from the state’s two-year budget. The governor’s budget proposal does not contain any tax increases, but local officials warn that municipalities likely will have to raise local property taxes in order to fill the gap left by dwindling state support.