Gov. Paul LePage’s recent letter to municipalities regarding his budget proposal to suspend the legally required municipal revenue sharing program raises a number of questions. In his letter, the governor says he cannot further reduce spending on core state services, so he chose to suspend municipal revenue sharing — and other property tax-relief programs — instead.
What the governor did not point out is that the reduction in the income tax rate for higher incomes enacted during the last legislative session — an effort that he led, and legislation that he signed — is the driving force in the more than $400 million state budget shortfall for the next biennium.
This raises major public policy questions. Should Maine increase its reliance on the local property tax to fund state governmental services when the state already has income and sales tax revenues at its discretion? Should property tax relief be effectively dismantled?
Why were these programs enacted by the Legislature years ago? When municipal revenue sharing began in 1972, the Legislature made the following “findings and purpose” which are still contained in law:
• The principal problem of financing municipal services is the burden on the property tax.
• To stabilize the municipal property tax burden and to aid in financing all municipal services, it is necessary to provide funds from the broad-based taxes of state government.
The Homestead Property Tax Exemption program is another case in point. The Legislature adopted this program in 1998 to provide targeted relief to Maine residential homeowners. Currently, $10,000 in valuation is exempt from property tax for the primary residences of all homeowners. The governor’s proposed budget would end this program for Maine homeowners who are not 65 years or older.
Municipal revenue sharing and the homestead exemption are two out of seven significant property tax-related programs and tax shifts targeted in the governor’s proposed budget. These proposals create great uncertainty for municipal budgeting. It will be exceptionally difficult for municipalities to maintain core services without shifting more costs onto local property taxpayers.
In explaining his decision to suspend revenue sharing, the governor wrote, “If every municipality wants to keep everything — public works, assessors, managers, police, schools, fire and other services — to themselves, then the voters of the municipality can make that decision. But those local decisions have price tags and we can no longer afford to hide from that reality.”
That statement is both inaccurate and insulting to municipal leaders who, for decades, have collaborated in order to provide quality local services in a cost-effective manner.
The town of Hermon provides a good illustration. When I participated with Hermon Town Manager Roger Raymond on a panel at a recent Bangor Region Chamber of Commerce forum, Raymond showed how his community is involved in more than 35 collaborative arrangements: contracting with the Penobscot County Sheriff’s Office for police services, participating in a regional solid waste facility, contracting with private-sector firms for much of the town’s road work and sharing services with the regional school district.
Hermon is one municipality among 492 in Maine. Thousands of examples of local collaboration exist statewide. More happen all the time.
In recent days, supporters of the governor’s budget have sent data showing that, since the early 1990s, property taxes rose faster than inflation. These data ignore two important facts regarding the debate over municipal revenue sharing:
1. Statewide, 70 percent of property tax revenues are spent for K-12 public education, not municipal services.
2. The state is a big part of the problem. It has ignored the municipal revenue-sharing law for five years, stripping the program of $44 million in 2012 and putting great pressure on municipal property taxpayers. The governor’s budget would only worsen that.
Municipal officials are committed to providing the basic services needed by residents and businesses, whether it’s plowing the roads, conducting local, state and federal elections, solid waste disposal, responding to police and fire calls, providing general assistance to residents in need and a range of other services. Municipal officials strive to keep property taxes as reasonable as possible but are subject to the uncertainties of what takes place at the state and federal levels.
Decisions regarding local budgets and property taxes are being made now. It’s incumbent upon the Legislature to reject the drastic tax shifts contained in the governor’s budget proposal and to maintain support for longstanding property tax relief programs.
Christopher G. Lockwood is executive director of the Maine Municipal Association.