Lawyers warn tax cap would wreak legal chaos

AUGUSTA – The Palesky tax cap proposal was described by lawyers Monday as a legal quagmire without precedent in Maine law that could paralyze school districts if it wins approval.

Lawyers from the Portland firm Drummond Woodsum & MacMahon cautioned the more than 200 school superintendents and school board members attending a Maine School Management Association briefing that it would be “extremely difficult” to predict how the courts would react if the tax cap passed on Nov. 2.

“If the tax cap legislation is approved by the voters … the most immediate result will be complete confusion and uncertainty as to what the tax cap legislation actually means and which parts of it are valid,” the lawyers told the group.

They also said that the myriad legal issues raised by the proposed law might not get sorted out until well after the deadline for passing the 2005-06 school budgets. Should that happen, they warned, Maine schools could encounter “paralyzing uncertainty” in dealing with the ramifications of Palesky passing.

Next year’s budgets must be approved by June 30, meaning that districts would have about five months to create their spending proposals for the coming year.

Lawyer William Stockmeyer said the Palesky proposal, which would cap property taxes at $10 per $1,000 in valuation, comes at a time when school leaders already are grappling with recent changes to school finance law enacted by the Legislature and the voters. He said that as difficult as it would be to integrate the existing changes, such as the requirement that the state provide 55 percent of the local cost of education, Palesky would only exacerbate the problem.

Stockmeyer likened the conflicting demands of laws already on the books and the Palesky proposal to the game of “Pick Up Sticks.” While some things can be moved without disrupting the overall goals, the slightest shift of others would cause havoc, he said.

“If the tax cap passes, the Legislature will have to modify those changes,” he said. “It is impossible to predict how the Legislature is going to address all these interlocking changes.”

His colleague, Richard Spencer, said as the Palesky proposal was written it was unclear whether the $10 cap would apply to a single taxing entity or to many.

While some municipalities have their own school department, such as Waterville, others are parts of school districts. Rockport, for instance, has a school administrative district and a consolidated school district, as well as county and municipal obligations. Whether the cap allows the four entities each to approve a $10 assessment or limits the assessment to $10 for all four combined was unclear, he said.

“In terms of the legal issues involved, it’s almost like a perfect storm where you have all these confounding legal issues” that have to be resolved, he said.

Spencer suggested that if the $10 cap was applied to all taxes raised by the various entities, it could be viewed as circumventing the provision of the Maine Constitution that prevents the Legislature from “never surrendering” its powers of taxation in any manner.

And if the current law giving school districts and counties the authority to create budgets were allowed to stand, they would have control over municipal government purse strings and theoretically could put their interests before the community as a whole.

“That seems like an odd result. We could end up with no police or fire protection,” Spencer said. “I don’t think there is any answer until the courts review it.”

Waterville school superintendent Eric Haley told the group that if Palesky passes, his $16 million budget would have to be cut by $7.9 million to meet the mill requirement. He said that while some supporters of the tax cap refer to such warnings as scare tactics, “if somebody doesn’t look at losing 50 percent of their budget as scary, I don’t know what to tell them.”

Haley also noted that despite the projected budgetary fallout, many people he has spoken to have indicated they planned to vote for Palesky if only to send the Legislature a message that lawmakers need to do something about high taxes.

Spencer reacted by cautioning the group that “it’s a very, very unwise thing to do to vote for something you don’t agree with just to send a message.”