Tax-reform battle heats up in Maine

On Election Day last November, 100,000 voters around the state, an all-time record, signed petitions sponsored by the Citizens to Reduce Local Property Taxes Statewide and the Maine Municipal Association to bring about major tax reform in our state. The petition, which will be voted on in November, demands that the state finally do something to bring relief to property taxpayers. The Legislature is now looking to place a competing measure on the ballot that is being pushed by the governor, which would significantly erode the current tax-reform effort.

Because property taxes are the most regressive and unfair form of taxation, tax-reform efforts have been made to shift tax burdens to wider-based, fairer taxes such as income and sales taxes. Despite some property tax relief (i.e., the Circuit Breaker and Homestead Exemption), the burden of property taxes has continued to grow throughout the state due primarily to Augusta’s educational mandates and their failure to pay a fair share of educational costs. The growth in property taxes to fund education has been dramatic since the 1991-92 recession when the state cut support to education and forced it onto the backs of property taxpayers.

At the time, the state was paying about 50 percent of the cost; today it pays about 42 percent. This decreasing trend runs directly counter to the Legislature’s intent to fund education at a level of 55 percent as part of the Education Reform Act in 1984. The current referendum proposal would force the state to honor its 1984 commitment and require the state to pay the full 55 percent cost of education, including 100 percent of the cost for special education. Picking up 100 percent of special education costs alone would be of great benefit to every community in the state.

Requiring the state to pay 55 percent of all K-12 education costs might also slow Augusta’s appetite to create new, expensive programs like Learning Results and Essential Programs and Services that must be paid by local taxpayers because Augusta never finds the money to do so. Failure to meet the EPS standards will result in a further loss of state funds to many communities because they do not or cannot meet curricula needs, minimum class sizes, etc., which will force local taxpayers to pick up the difference if they want to continue the offering. Translation: higher property taxes to support education.

The proposed referendum also offers financial incentives for schools and municipalities to consider efforts to share and/or consolidate services. This need was recognized by MMA well before last year’s elections and included in the referendum question. A number of communities are now beginning to consider such actions.

While politics requires healthy debate over controversial ideas, Augusta displays a distinct lack of knowledge about how local government operates and lacks clear understanding about how efficient, effective and frugal local government is and how the costs for education, county government and other areas that municipalities have little ability to control impact property taxes. For example, here in Millinocket, the municipal budget has decreased by more than $900,000 during my four-year tenure while the school and county budgets have increased during that same period.

The governor’s proposal may sound attractive and appear to be a balanced approach to solving the school funding mess. Do not be fooled. This is a political Trojan Horse. The governor’s proposal would not fund 55 percent of education costs until Fiscal 2010 (six years from now) and then it would only fund 55 percent of the EPS model, not truly 55 percent of all education costs. Between FY 2006 and FY 2010, the state would “ramp up” its educational support, but that support would not come close to the referendum proposal’s relief because it would be based on a convoluted formula that is almost incomprehensible for the average voter to understand.

For example, the governor’s FY 2006 funding proposal would initially fund only 49 percent of 84 percent (not 100 percent) of the total EPS costs. In other words, the state would force local communities to fund 100 percent of the remaining 16 percent plus 51 percent of the original 84 percent.

Confused? This would have the impact of raising local property taxes, not lowering them, on Day 1 of the governor’s proposal taking effect. Put another way, the current overall state percentage of 42 percent would actually decrease and require higher property taxes to support local education statewide. The governor’s proposal to cap annual increases in municipal spending to 4.6 percent a year, with some exceptions, is an unfair tactic by the state that suggests communities, once given school funding relief, would then use this “new” money for new municipal spending. I know of no communities contemplating such an action. Instead, they are looking forward to reducing their citizens’ property tax burdens – period.

The proposed referendum will force the state to address directly the problems of educational funding and end the political paralysis over tax reform in Augusta. Yes, it will shift costs from local property taxes (the most regressive of all taxes) to more progressive taxes at the state level. But this is far preferable to what we are doing now. And we will not have to wait until Fiscal 2010 to get property tax relief.

When the people speak in November to end Augusta’s gimmicks and politics as usual, all of us will be well served. Do not be fooled by the competing measure now being considered in Augusta that will only bring more gimmicks and higher tax bills to our communities. Join the real effort to reduce property taxes by supporting the referendum question in November.

It’s your money.

Gene Conlogue is the Millinocket town manager.