LePage budget could spell ruin for towns

STATE — A proposed state budget released by Governor Paul LePage's office last Friday would result in a massive tax shift onto local property owners and municipalities, according to opponents of the proposal.

Town officials in Oxford Hills are warning that the $6.3 billion 2014-2015 biennial budget may result in property tax hikes and service cuts.

Particularly worrying is the proposed suspension of state revenue sharing with towns and cities.

"In a word, it's devastating," said Eric Conrad, the communications director of the Maine Municipal Association.

According to a preliminary budget analysis prepared by Geoff Herman, MMA's director of state and federal relations,  LePage's budget would strip $420 million from municipalities and local property taxpayers over the next two years.

In a statement attached to the budget summary, LePage said the budget "balances the priorities of the people of Maine by maintaining the crucial safety net for our most vulnerable while holding the line on our already too high tax burden."

"Now is not the time to raise taxes on Maine's hardworking families and small businesses," LePage wrote.

For critics of the proposal, however, that's exactly what the governor's budget means.

"To us, it's a classic case of the state abdicating its responsibility to control its own costs or raise its own revenues so its forcing all those tough decisions on those towns and cities," Conrad said. 

Hit to towns

Suspending revenue sharing would save nearly $200 million over the next two years, according to the proposed budget.

Herman's analysis, however, suggests the cost to municipalities would be closer to $283 million, taking into account reductions in revenue sharing in the last few years.

Losing that revenue means towns may need to raise additional tax revenue or begin cutting back on services – or both.

Revenue sharing is only the most significant proposal in a budget full of negatives for local taxpayers, according to Herman's analysis.

The proposal eliminates the Homestead Tax Exemption for those under 65. According to Herman, losing the tax exemption, which subtracts $10,000 from assessed value of a primary home, could mean an average automatic tax increase of $120 for 200,000 Maine homeowners.

The proposal would also limit the "circuit-breaker" rent and tax relief program to those age 65 and older and place fresh restrictions on income thresholds for the benefit.

Additional proposals include requisitioning a share of the excise tax towns collect on commercial trucks, placing a $10.2 million cap on general assistance reimbursement, flat-funding general purpose aid to schools and requiring local school districts to contribute 50 percent of teacher's retirement funding.

"The Governor's proposal delivers a double whammy to all property taxpayers in this state by first jacking up the property tax rate in a variety of ways then eviscerating the programs that are designed to help people who are having trouble paying their property taxes," Herman concluded.

Local pain

For local officials already ringing alarm bells about the possible 11-percent assessment increase for towns in SAD 17 next year, LePage's proposal is bad news.

"We're one of the most financially sound towns in the state of Maine and it would still be a big impact," said Oxford Town Manager Michael Chammings.

Chammings said the town could stand to lose around $223,000 in revenue sharing next year, compounding the strain already put on towns over the past few years.

"Truthfully, no one's been doing more sacrificing than the towns; we've had flat budgets for years and cut back and you haven't seen that in some of the other [state and federal budget] areas."

Norway Town Manager David Holt called the proposed budget "the toughest financial hit I can remember."

He said the town stood to lose around $250,000 per year from revenue sharing and he had begun preparing a list of possible budget cuts to discuss with department heads this week.

Even with cuts, the proposed budget would probably result in tax increases, Holt predicted.

"I expect to stand up and bear the responsibility of what my job is ... but if people expect me to know how to deal with this without people feeling it, then their expecations are beyond what I can do," Holt said. 

The shock of the proposed budget couldn't have come at a worse time for Paris, already dealing with its own financial crisis, said Town Manager Amy Bernard.

She estimated a loss of $300,000 in revenue sharing could result in a $1 mil rate increase, adding $135 to the average homeowner's tax bill.

"It's a grim picture," Bernard said.

"The economy is not booming ... people are working two jobs to pay their bills ... a $135 tax increase is too much to ask."

Chammings suspected the proposal would probably be blunted as it made its way through the legislative process.

"It's probably still going to hurt, but I think it's going to be tweaked a little bit," Chammings said.

Bernard also predicted the political will to enact the budget as proposed didn't exist among legislators.

MMA's Conrad says the association has begun a lobbying effort to alter the proposal.

MMA intends to work with towns across the state and draw detailed, town-by-town analyses for the impact of the budget.

Related calls to the Governor's office were not returned by press time.