Delivering on the promise of education funding reform

Under the heading, “Same old tax news,” this paper [on May 14] editorialized on an education funding reform proposal that narrowly passed the Maine House of Representatives and was killed by an overwhelming and bipartisan majority in the Maine State Senate. While we disagree with the Bangor Daily News’ view on the specific proposal, we embrace the paper’s call for changes to Maine’s archaic tax system.

We believe that meaningful reform of education funding must decrease our reliance on the property tax, fully fund education, strengthen our economy by removing disincentives for investment, and ultimately be fair. To accomplish these objectives a reform package must include protections to ensure that promises of property relief are realized. While a good start, the education funding reform proposal would not have reduced our overall tax burden nor did it include guarantees ensuring that new revenues would be used to offset existing taxes.

Had the Legislature approved the education funding reform proposal, the property tax that can be used to fund local education would have been capped at six mills for all property except for second homes, which would have been capped at 12 mills. The state would then pick up the rest of the cost of providing yet-to-be-defined essential education services. The additional cost to the state, expected to be at least $275 million, would be covered through a massive broadening of the sales tax.

In theory, the proposal makes some sense. In practice, however, there was little hope that taxpayers would get the relief they were promised. Proponents were slow to point out how easily the property tax cap could be altered. For instance, communities could increase the mill rate on primary residents to offer services above and beyond newly defined essential services. Likewise, a simple majority of the Legislature could increase the property tax cap to reduce the state’s contributions to fund education. A legislative increase in the property tax cap would be a very real possibility in times when the state faces a financial challenge.

A second concern is that the proposal before the Legislature did not include protections that would provide for long-term property tax relief. Consequently, municipal governments could choose to use the savings from the education tax cap to expand local government.

We agree with those who suggest that municipalities are, for the most part, fiscally responsible. We also agree that, all things being equal, some property tax relief is better than none. All things are not equal with this proposal, however, in that proponents planned to increase the sales tax to pay for the property tax reduction. If, in the end, we increase the sales tax by $275 million but the property taxpayer only gets $200 million in relief because cities and towns are funding new priorities with the education savings, our first-in-the nation tax burden goes even higher.

When it comes to the sales tax, proponents of the education funding reform proposal actually suggested we expand and increase the tax enough to generate $400 million. $275 million of the new revenue would be used to pay for the state’s new education expenses. The remaining $125 million would be used to provide additional tax relief.

One concern was that we had no idea what we would have to tax to generate another $400 million in sales tax revenue – the proposal put these difficult decisions off to the next Legislature. Even in the name of property tax relief, it is irresponsible for one Legislature to create a $400 million liability for the next. Another concern is that without the guarantees we sought, a simple majority in the Legislature could hijack this new revenue to fund new or expanded state programs rather than provide tax relief.

Despite being incomplete, we think the education funding reform proposal can serve as a basis for achieving real tax reform in the next Legislature. Improvements need to include protections guaranteeing that long term property tax relief is achieved. In addition, all tax and spending decisions must be presented as a complete package so we can make honest decisions about tax reform and school funding. These simple improvements would go a long way to ensuring that we deliver on the tax reform we promise to the voters.

Rep. Richard Rosen, R-Bucksport, is a member of the Appropriations Committee and Sen. Edward Youngblood, R-Penobscot, is a member of the Business and Economic Development and the State and Local Government Committees.