Governor, lawmakers unite on bill Tax relief plan to join MMA proposal on ballot

AUGUSTA – Maine lawmakers united Friday evening behind a revamped version of Gov. John E. Baldacci’s competing measure on tax relief as the two-day special legislative session plodded toward a late-evening adjournment.

The governor’s proposal now will appear on the Nov. 4 ballot as an alternative to the Maine Municipal Association’s tax relief plan.

Incorporating and refining recommendations attached to LD 1629 on Thursday by the Maine House, the Senate, with four members absent, gave all but final approval to the bill in a 31-0 vote. Shortly after 11 p.m., the House approved the legislation in a final 112-22 vote and the Senate followed with a unanimous final endorsement 40 minutes later.

After two days in a row that began at 8 a.m. and ended around midnight, Baldacci wouldn’t concede that at times he harbored doubts over whether lawmakers would pass his bill.

“I’m a Red Sox fan and we know that everything is not a slam-dunk,” the governor said after the final vote. “We have to wait ’til the last out of the last inning. And by the way, the Red Sox won, the Yankees won and the people of Maine won tonight.”

The amended bill enacted by the Legislature departs from the governor’s proposal in several significant areas including:

. The removal of a 4.6 percent cap on increases to municipal spending by cities and towns;

. A phased-in expansion over three years of an additional $10 million to the circuit breaker program, which provides property tax relief to qualifying homeowners and renters, to become effective in the current fiscal year;

. The restoration of $5 million in benefits under the Homestead Tax Exemption Program, which discounts assessed property values, in the current fiscal year to reimbursement levels that existed before July 1;

. The elimination of a requirement for a local referendum for cities and towns which want to increase local education funding beyond 45 percent of total costs after 2010;

. The imposition of oversight responsibilities to key state agencies to review the competing measure in 2010 – if it is approved by the voters – and report those findings to the Legislature’s Taxation Committee for any further revision.

Baldacci’s original competing measure proposal was criticized Thursday for failing to provide any additional money for immediate tax relief. Objections also were voiced against several mechanisms in the proposal designed to hold down the growth of municipal budgets and curb the expansion of local school costs.

Many city officials took offense at what they perceived as an attempt by the governor to hold municipalities responsible for spiraling property taxes. Some school board members chafed at the local referendum provision for increases beyond 45 percent in 2010, claiming the requirement infringed on the traditional funding negotiations between local town or city councils and school committees.

Concerned that public and legislative support for LD 1629 was eroding rapidly as the first day of the special session opened Thursday, Baldacci remained true to his consensus-building pledge. He quickly entered into negotiations with House and Senate leaders to ensure he would have some kind of a plan that retained strong legislative support to compete with the MMA proposal.

Baldacci reluctantly conceded Friday that his plans to establish targets for savings and cost containment at the county and municipal levels will have to wait until the next session of the Legislature begins in January. Still, the governor was pleased with the strong endorsement he received from the Legislature which he believes will provide the plan with influential proponents across the state.

“We have to respect the legislative process because the lawmakers are representatives of the people and their participation certainly will enhance the viability of the plan and attract the strong support of the voters,” Baldacci said.

Before the Senate’s unanimous vote in favor of the amended proposal, Assistant Senate Majority Leader Kenneth Gagnon, D-Waterville, praised the efforts of the Legislature’s Taxation Committee which had worked with Baldacci to craft much of LD 1629. Gagnon sponsored the amendments that repealed the municipal spending cap and the local referendum provision for local education spending increases beyond 45 percent of a community’s local share of education costs. He said many municipal officials had inferred from the governor’s original proposal that they were somehow less than thorough or frugal in assessing their spending priorities.

“Those of us who have served at the local level know how difficult it is to deal with local budgets, particularly with federal mandates and other costs that are out of control for municipal officials,” he said. “[With this amendment] what we want to make sure of is that we have them as our partners in trying to encourage passage of this referendum.”

Sen. Rick Bennett, R-Norway, said the Senate’s action assured the public that property tax revenue would not be replaced with income and sales tax revenue. He credited the MMA with lighting a fire under the Legislature.

“I want to say ‘thank you’ to the MMA for putting forth a proposal that demanded action and forced us to deal with an issue that’s been very difficult for us to deal with for many years and has brought the issue to a head in a fashion that has forced us to look deep within ourselves and find our differences and find the means of overcoming them,” Bennett said. “I look at this proposal as a triumph for this Legislature and this session.”

The debate on LD 1629 was sparked by a citizens’ initiative launched by the MMA, a lobbying group for city and town governments, that attracted nearly 100,000 signatories. The organization had grown increasingly frustrated with the state’s failure to comply with a 1984 law that guaranteed lawmakers would approve 55 percent of local education costs. Baldacci said that currently the state pays about 43 percent of those expenses.

The MMA proposal will require the state to fund the 55 percent figure effective July 1, 2004. If approved by the voters, the measure’s $264 million in additional educational funding would have to be determined by the lawmakers no later than March 1, 2004.

“Almost all tax reform ideas sound really good by themselves, it’s not until you look at the costs and what you have to do in return to implement one of these programs that you find out it can be a little tougher than it sounds,” said Rep. Joe Perry, D-Bangor, a member of the Taxation Committee. “That’s the problem with the MMA proposal. It would lead the average person going to the ballot box to believe that the $264 million is coming out of thin air. That’s just not going to happen.”

Baldacci opposed the MMA plan because the state would have either to hike taxes immediately or to slash social services programs to fund the initiative. He also argued there is nothing in the legislation that compels municipalities to use the money for property tax relief.

The governor’s amended bill increases the state’s share of local education funding to 55 percent – but at a slower, phased-in rate, deferring 100 percent of the funding goal until fiscal year 2010. Baldacci would pay for the increase of nearly $300 million over five years by dedicating to education most of the state’s annual growth in revenues – estimated at about $100 million per year.