One complaint about the previous Legislature was the way it responded to Maine’s fiscal crisis by, in part, kicking the problem down one level to schools and municipalities.
Now, unfortunately, Gov. Paul LePage’s administration is proposing a change that would, again, help solve the state’s problems by shifting them to local communities.
For decades, Maine cities and towns have received 5 percent of the state’s sales and income taxes. In good times, the municipalities got more and in bad times they got less. It’s called revenue-sharing.
During the Gov. John Baldacci years, towns and cities received less, in part, because sales and income tax revenues were less. But, on top of that, the Legislature took money out of that 5 percent going to towns: $25 million in 2010 and $39 million for 2011.
That simply made a legislator’s financial problem a city manager’s disaster. Auburn is a good example.
If it hadn’t been for the revenue-sharing cuts the city absorbed in 2010, Auburn could have held its 2010 budget steady or even cut property taxes. Instead, it had to raise them.
After two years of chopping, Auburn is now looking at a draft 2012 budget calling for a 9 percent property tax increase. That is a projection based on the governor’s new revenue-sharing plan.
In the name of stabilizing revenue to local communities, the governor’s plan calls for switching from a fixed percentage of state revenue to a flat appropriation to be set each biennium by the Legislature.
That flat figure would be slightly higher than the municipalities got this year. But it would be far, far less than they would receive under the normal 5 percent allocation.
Auburn, for instance, would lose about $1.2 million, Lewiston about $2 million and Portland about $3 million.
The governor claims the communities would get more predictability. In fact, they would get less.
Each year, municipalities would have to compete with all other state priorities for funding.
Depending upon the composition of the Legislature, it could choose to be generous one year and tightfisted the next.
What’s more, as the economy improves, municipalities would be unlikely to share in the increasing revenue.
Worse, as communities lost revenue they would be forced to increase their single major source of revenue — property taxes. This would result in even more dependence on an outmoded and regressive form of taxation that is particularly punishing for the elderly on fixed incomes.
The reason for revenue-sharing is that state law forbids local communities from imposing their own local-option taxes.
For instance, in some parts of the country, cities can establish their own income taxes, sales taxes or hotel/motel taxes. They tax everything from rental cars to amusement parks.
That doesn’t happen in Maine. revenue-sharing is the alternative.
The governor is, of course, not about to raise taxes to fill his budget gap. He has, instead, proposed about $2 million worth of tax cuts.
Last week, the Taxation Committee voted 9-3 to stick with the current revenue-sharing formula but to adopt the governor’s proposed revenue-sharing cuts, which seem likely to pass in the full Legislature.
When he signs this budget bill, our no-tax-increase governor will be directly responsible for the local property tax increases that surely will follow.
rrhoades@sunjournal.com
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