Controversial revenue-sharing bill headed to vote in Maine House

House Speaker Mark Eves, D-North Berwick
Bangor Daily News/Christopher Cousins | Bangor Daily News/Christopher Cousins
House Speaker Mark Eves, D-North Berwick Buy Photo
Posted Feb. 06, 2014, at 8:42 a.m.

AUGUSTA, Maine — A bill meant to restore $40 million in state revenue sharing for cities and towns is scheduled to go before the Maine House of Representatives on Thursday morning.

The bill, LD 1762, was approved by the Legislature’s budget-writing Appropriations Committee earlier this week on a party-line vote with majority Democrats backing the measure and Republicans opposing it.

It uses funds from the state’s “budget stabilization” fund as well as an account that was established under a GOP majority in 2010 to lower the state’s income tax rate.

The bill also proposes to restore the budget stabilization fund with new tax revenues that are projected to come in this year.

The measure takes $21 million from reserves, $4 million from income tax break fund, and $15 million from new revenue.

The measure also depends largely on forecasted tax revenue, a move Republicans have said is risky, as it is money the state does not actually have on hand.

The move by Democrats is meant to reflect their support for restoring revenue sharing to municipalities. The state shares a portion of the sales and income tax revenue it collects with cities and towns in an effort to help reduce the need to fund municipal budgets with property taxes and thus reduce the property tax burden on local home and business owners.

Republicans have said the move is not necessary at this point as the state aid in question would be distributed in 2015 and that lawmakers should instead focus on resolving a projected state budget shortfall for 2014 that amounts to about $45 million.

Republicans also say current law will restore the funding for cities in 2015, if the revenues are available.

Democrats say the restoration in funding needs to be secure this year as cities and towns are in the process of crafting their fiscal year 2015 budgets, many of which go before town-meeting voters in March for approval.

“If we break our promise, cities and towns across the state will have to raise property taxes on middle class families and small business or cut funds for our schools, firefighters and police — many will have to do both,” said Rep. Peggy Rotundo, D-Lewiston, House chairwoman of the Appropriations Committee.

In January, officials from cities and towns flooded a public hearing on the issue at the State House, saying if the the funding is not restored they will be forced to cut services and likely increase property taxes as well.

Maine’s municipalities typically received 5 percent of all state sales and income tax revenue, which would have been $138 million this year, according to the Maine Municipal Association.

In 2013, lawmakers reduced revenue sharing from about $96 million to about $65 million for 2014; if the $40 million hole isn’t filled, that figure will drop to about $20 million in 2015. Together, the reductions would amount to a 79 percent cut in state funding for municipalities over the two-year period.

According to a recent MMA analysis, a failure to restore the funding level would mean that instead of $2.6 million from the state in 2015, Lewiston would get $881,030.

For Bangor, instead of a little more than $2 million, the city would receive $692,550; and for Portland, the change would be from $3.9 million to $1.3 million.

“We have no time to lose. Our communities are in crisis,” Speaker of the House Mark Eves, D-North Berwick said. “Many cities and towns are planning their budgets now. We must keep our promise.”

Over half of the state’s towns have either just begun their fiscal year or will do so while the Legislature is in session, Democrats said in a news release early Thursday. The rest of the state’s cities and towns end their fiscal year on June 30.

“The choice is clear,” said Assistant House Majority Leader Jeff McCabe of Skowhegan. “We must meet our obligation to the towns and the people we represent.”

The House is expected to take an initial vote on the measure Thursday, but it will face additional votes in both the House and Senate before being sent to the desk of Republican Gov. Paul LePage.

A spokeswoman for LePage said earlier this week the bill faces a certain veto from the governor.

 

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