AUGUSTA, Maine — Gov. Paul LePage on Tuesday dismissed three suggestions by a group representing mayors of 12 Maine cities that they say improve upon his plan to balance the next state budget by suspending municipal revenue sharing for two years.
In a letter Tuesday to LePage, the Mayors’ Coalition suggested three alternatives to the governor’s proposal to eliminate state revenue sharing payments to municipalities during the two-year budget cycle that begins July 1. The group’s letter identifies delaying income tax cuts passed by the previous Legislature as the mayors’ preferred alternative, because it wouldn’t raise taxes. The letter also suggests two other options: a temporary sales tax increase and comprehensive tax reform similar to the plan presented last week by a bipartisan group of legislators dubbed the Gang of 11.
In a response issued Tuesday afternoon, LePage rejected all three options as tax increases that “don’t address the real problem facing our state, which is out-of-control government spending.”
“I made the tough choices when I presented my balanced budget four months ago,” LePage said in a prepared statement. “The state cannot keep spending money we don’t have, and I will not keep adding to the tax burden of hardworking Mainers.”
Tuesday’s volleys are the latest in an escalating conflict between LePage and the leaders of Maine’s most populous cities over how to pay for government services. On Monday, Portland’s mayor and school superintendent blasted the governor for forcing them to make budget decisions they believe will harm students. More than 50 municipalities and school districts have passed resolutions condemning the governor’s biennial budget proposal.
Adrienne Bennett, the governor’s spokeswoman, noted Tuesday that revenue sharing represents a small percentage of the total budgets for Maine’s largest communities — generally 2 percent to 4 percent.
The mayors issued their suggestions in response to an April 25 letter from LePage, in which the governor laid out the challenges he faced in crafting his $6.3 billion biennial budget and asked for “serious ideas” as alternatives to his plan to suspend municipal revenue sharing for two years to help balance the budget.
In his letter that addressed municipal officials’ criticisms of his budget, LePage listed education, welfare and revenue sharing as the three “large pots of money” that he could tap to meet the constitutional mandate to present a balanced state budget. “I chose revenue sharing,” he wrote. LePage also offered the state’s “flexibility” to municipalities seeking “to reduce their own budgets.”
The mayors’ group countered with an argument that municipalities, which “have already absorbed $40 million a year in revenue sharing cuts,” need money, not flexibility. The best way to provide that money, the mayors’ letter asserts, is to delay income tax cuts until Maine fully recovers from a lingering economic recession.
Doing so, they claim, would restore $350 million in state revenues during the biennium, making it possible to fund municipal revenue sharing at its current 3.5 percent and negating the need for other state cost-saving proposals LePage included in his budget. Among them are changes to the homestead exemption and circuit breaker property tax relief programs, a shift of vehicle excise tax payments from municipalities to the state and a proposal to have local school districts assume responsibility for half of the payments to the teachers’ retirement program.
“This limited and conservative approach recognizes the reality that Maine, like the nation, is only slowly emerging from the Great Recession,” the mayors’ letter states, emphasizing that the proposal is not a tax increase.
As a second alternative, the coalition suggested a temporary sales tax increase from 5 percent to 6 percent, similar to what state government did to address revenue shortfalls during the early 1990s, when Maine’s last Republican governor, John McKernan, held office. The mayors also propose hiking the lodging tax to 10 percent and a “modest” expansion of the sales tax base.
That option would shift a greater share of Maine’s tax burden to nonresidents and strike a better balance between sales, income and property taxes, they say.
As a third option, the mayors wrote that they “strongly support comprehensive tax reform to balance the major sources of government revenue — sales, income and property taxes.” They described LD 1496, the Gang of 11’s tax reform proposal that was considered by the Legislature’s Taxation Committee during a work session Tuesday, as a “credible tax reform proposal” that also would help stabilize the state’s revenue stream.
LePage, who last week voiced his opposition to the tax reform proposal, on Tuesday reiterated his assertion that municipal officials could handle revenue sharing cuts without increasing property taxes.
“When I was mayor [of Waterville], I was able to reduce taxes without reducing services,” he said in Tuesday’s prepared statement. “I know that it can be done if local officials are willing to make the same difficult decisions I made as mayor.”
Karen Heck, Waterville’s current mayor, said by phone Tuesday that it’s disingenuous for LePage to make that claim because he used the city’s surplus to pay operating expenses, allowing him to reduce property taxes.
“He’s misrepresenting the fact that [a city] cannot continue to take surplus to fund operations,” Heck said. “It’s totally unsustainable. It also affects your bond rating.”
Heck said that, like LePage, the mayors are “truly interested in representing the taxpayers.” But she said that because property taxes are more regressive than income and sales taxes, “our proposals are a much fairer way to apportion the taxes we have to pay for the government services we all need.”
The Mayors Coalition includes the mayors of Portland, Bangor, Augusta, Waterville, Lewiston, Auburn and other service centers, mostly in southern and central Maine.