AUGUSTA – With state revenues about $250 million below estimates, cities and towns across the state got the bad news last week that they will get smaller revenue-sharing checks than they were expecting, and in many cases less than they got last year.

“The Treasurer’s Office sent out a notice last week and we have posted the spreadsheet on our Web site,” said Geoff Herman, director of state and federal relations for the Maine Municipal Association. “I think most officials knew it was coming, but it is important for them to know how much less they will be getting than they were expecting.”

Unlike most programs where the Legislature appropriates funding, revenue-sharing money comes directly out of the cash generated by sales and income taxes before going into the state’s General Fund. Currently, 5.1 percent, or about $106 million a year, goes to cities and towns monthly.

Revenue sharing is distributed on the basis of a formula that takes into account year-to-year changes in population and local property tax rates. Herman said the percentage of the overall “revenue-sharing pie” that each municipality gets changes year to year. That means some communities may get a little more than they received last year, even though the amount will be less than they were expecting to receive based on previous state revenue projections.

“The overall size of the pie is less, and we hope it does not get any smaller,” he said.

If state revenues are reprojected downward again, revenue sharing will have to be reduced even more and municipalities will be faced with filling larger budget gaps.

“Welcome to our nightmare,” said Sen. Kenneth Gagnon, D-Waterville, co-chairman of the Legislature’s Taxation Committee. “It’s not going to be easy to make up for $250 million in revenue shortfalls, so I certainly have a lot of sympathy for the impact at the local level.”

Herman agreed the Legislature faces a daunting task, but added he hoped lawmakers do not shift the burden of balancing the state budget to the municipalities. He acknowledged that basic revenue sharing always is based on estimates and that the amounts cities and towns will get is a projection, not a promise.

“But, town officials use the projections in setting their budgets,” he said.

And in some cases, the difference between what was projected last year and what municipalities are now expected to receive is significant. Lewiston got $4,643,075 last year, but is expected to get $225,573 less this year. Bangor is expected to get $239,052 less than the total of $3,630,672 received last year. Biddeford is expected to get $81,029 less than the $1,893,508 the city got in 2001.

“We are all right, but that’s because auto excise tax revenues are way up,” said Bangor City Manager Edward Barrett. “And we did not develop our budget on the basis of all we were projected to receive, we were conservative, and it’s a good thing we were.”

Richard Metivier, finance director for Lewiston, said his office also was conservative when estimating state revenue-sharing dollars for the city budget. He said the city has taken several steps, such as leaving positions unfilled, to keep the budget in balance and thus can weather the reduced amount of state revenue sharing.

But he said the city was concerned that revenues might go down more.

“That would put us in a bind,” he said.

The group that projects state revenues meets again next month to review the economy and could offer new numbers. The panel in November said revenues for the current two-year state budget would be about $250 million below their original estimates.

Both Metivier and Barrett are concerned lawmakers could reduce state education aid to municipalities, despite comments from lawmakers in both parties who say they do not want to cut school aid. Barrett said it took Bangor nearly a decade to recover from the school aid cuts made to balance the state budget in the last recession.

“We finally got back to the 1991 level in our 2000 budget,” he said.

Metivier said he also hopes lawmakers do not repeal the planned increase in the share of state revenues that are distributed under the revenue-sharing law. Under law, the amount of revenue sharing will increase from 5.1 percent of state revenues to 5.2 percent in the budget year that starts July 1. But that one-tenth of a percent is about $2 million that could be used by lawmakers to balance the state budget.

“We are very worried about that as a target and we will certainly fight to keep it from being repealed,” Herman said.

And it also is very unlikely there will be any cash to fund the new Revenue Sharing II program that was started last year with a one-time appropriation of $3.6 million.

All communities receive regular revenue-sharing funds monthly, but the new tier of revenue sharing was aimed at helping those communities that have high property tax rates. Such Revenue Sharing II funds are distributed just once a year, and only if state revenues increase faster than the rate of inflation.

“It’s pretty clear there will be no [Revenue Sharing] II money this year,” Herman said.

While he said communities did not budget for the extra help, there were projections that the new program would have provided nearly $10 million in aid this year. Lewiston would have received an additional $580,932 from Revenue Sharing II if revenues had grown as projected just a year ago. Bangor would have received an additional $405,308, and Biddeford a projected $175,362.

Gagnon, who crafted the new revenue-sharing program, said he hopes the program will provide greater help in future years.

“The bottom line is any money we can give to the towns in revenue sharing helps reduce the property tax burden,” he said. “And I think everybody agrees we should try to reduce that burden.”