Nov. 4, Maine voters will face a ballot that begins with three questions, “1A, 1B, and 1C.” 1A represents the bill initiated by petitions circulated by the Maine Municipal Association. It reads, “Do you want the state to pay 55 percent of the cost of public education, which includes all special education costs, for the purpose of shifting costs from the property tax to state resources?”

1B represents the “competing measure” which was proposed by the governor and approved with the bipartisan support of a better than two-thirds majority of both bodies of the Legislature. It reads ” Do you want to lower property taxes and avoid the need for a significant increase in state taxes by phasing in a 55 percent contribution to the cost of public education and by providing expanded property tax relief?”

1C is “against both the citizen’s Initiative and the competing measure.”

For some time many have us have argued that the best long-term solution to Maine’s challenges would be to expand the sales tax base to services not presently taxed, and to use those new revenues for property tax relief targeted to individual households and communities that currently struggle with disproportionately high property tax burdens. The trouble is that taxing even a fairly expansive list of services would raise only about $180 million, still well short of the $250 million required to implement Question 1A in the first year, and it would be extremely difficult to get consensus around such a list.

Thus Question 1A would likely have a serious and negative impact on other state obligations equally essential to our future, such as higher education and health care. Such states as California, Oregon, and Massachusetts have learned from the recent slump in state revenues the havoc that can be caused by shifting too much too fast of K-12 costs from property taxes to state tax sources.

The competing measure, on the other hand, sets a reasonable path for gradually shifting state support for education to the essential programs and services model upon which for the first time establishes what educating a child should reasonably cost, and commits the state to 55 percent of that amount.

No school funding model by itself can be expected to completely protect those municipalities that are experiencing rapid and large valuation increases. The school funding formula can protect all taxpayers in lower valuation communities. But The Maine Residents Homeowners and Renter Property Tax Reimbursement Program is the best tool to protect individual taxpayers in higher value communities.

The Legislature added to the governor’s proposal an increase more than doubling the Maine Residents Homeowners and Renter Property Tax Reimbursement Program. The present property tax relief program (commonly referred to as the “circuit-breaker”) targets property tax relief to the households in Maine that have the greatest need for that relief, because their property taxes are a disproportionate share of their income. The competing measure would over three years phase in the income eligibility of households with income up to $70,000, raise the overall benefit cap to $2000, and raise the proportion of taxes reimbursed to 60 percent of the taxes that exceed 4 percent of income. The increases in this program contained in Question 1B are the surest path to genuine property tax relief for the households in Maine in greatest need of that relief.

The historical experience of the state adding significant amounts to school funding each year has NOT lead to reductions in property tax burdens. Rather the total costs for K-12 education have increased at rate close to 7 percent a year and property tax increases have been not too far behind. If special education continues to be administered on the local level but paid for 100 percent by the state, as called for in Question 1A, there will be a strong incentive for local school authorities to broadly diagnose the need for special education and increase those costs even more rapidly.

Meanwhile the K-12 school population is projected to continue to decline, while the populations in need of other state services, such as elders and others needing health care, and adult workers needing post-secondary education, are projected to grow.

Question 1B will finance gradually increasing the state share of school funding within the currently projected state revenue increases, and devote state resources to tax relief targeted to the households with the greatest property tax burdens. Question 1A proposes to spend resources the state does not have and Question 1C leaves the state in the unacceptable status quo. A failure of 1B could may lead to the unfortunate consequence of promoting the much more draconian California style property tax cap which is expected on the ballot in November 2004.

Christopher St.John is executive director of

the Maine Center for Economic Policy.