Spiking home prices are leading to school budget challenges in some Maine communities
When Gov. Janet Mills introduced her latest biennial budget proposal this month, she touted the fact that the state had for the first time achieved its obligation to pay 55% of local education costs.
"My budget proposal includes $101 million to continue that commitment, to keep it at 55%. Investing directly in our schools, teachers, and staff, and helping our communities hold the line on property taxes," Mills told the legislature.
But some districts say that rising costs — and rising property values — could still force them to cut staff or raise taxes in the months ahead.
RSU 34 Superintendent Matthew Cyr said he expected this year's budget season could be a challenge, with costs climbing because of pay raises granted to district employees, along with rising heat and electric bills.
On top of that, Cyr said the district, comprised of students from Old Town, Alton, and Bradley, has been trying to figure out how to retain teachers, counselors and social workers that were hired in recent years using temporary COVID relief funds. Cyr said the staff members played an important role in helping students catch up, both academically and emotionally.
"We typically hadn't had before, or at least not to the degree of what we wanted," Cyr said. "And this allowed us to do that. But the funding for those positions goes away."
Then last month, Cyr said, the district learned that its state subsidy was projected to drop by more than $250,000 -- due in part to declining enrollment and higher property values.
Cyr said that all of this will require tough decisions over the next few months about how to preserve programs and services without big property tax hikes.
"So it's kind of a domino effect of, you know, you're playing Jenga here. And what can I pull out, that doesn't make everything crumble?" he said.
Steve Bailey, the executive director of the Maine School Management Association, said RSU 34 isn't alone. While the governor's budget includes an overall increase in state funding to local schools, Bailey said several districts — many in southern and coastal Maine — are facing the consequences of a change in one major variable in the school funding formula: property values.
"We really saw quite the spike in house prices, as well as land values," Bailey said.
In general, Bailey said, the higher the value of property in a given school district, the less state funding that community receives. So major housing price spikes in certain communities can trigger a reduction in state aid.
"That particular piece has, given the impression anyway, that towns are able to raise more money to support education," Bailey said.
Kenneth Johnson, the superintendent of AOS 77, in Washington County, said he's already seeing that impact in the small, coastal town of Lubec, along the Canadian border.
Johnson said booming waterfront real estate value is one factor behind a reduction in state funding of more than $100,000, and he said it will be difficult to find new revenue in a town without much industry.
In addition, Johnson said, the school is already facing unforeseen repair costs from recent winter storm damage to its roof and frozen pipes.
"It'll be a very, very strong challenge to try and maintain the level of service that they are accustomed to and avoid deep budget cuts," Johnson said.
These issues aren't just affecting small communities. In Portland, Interim Co-Superintendent Malea Nalli said the district will have to spend $8 million more this year just to maintain its current programs. The city is also expected to lose more than $2 million in state subsidy — leaving a sizable hole to fill.
Nalli said the district is looking at its options for addressing the short-term budget gaps. But she said if the trends continue, the district may need to explore larger, structural changes.
"Including revisiting past conversations we've had about things like school reconfiguration, that need a longer runway, if you will, to work on," she said. "So we wouldn't want to wait until next budget season, to suddenly have to open up that conversation with our community."
In a statement, a Maine Department of Education spokesperson said that the state's funding formula is designed to provide equitable support for schools across the state, and notes that the administration has already made "historic investments" to meet the state's 55% school funding obligation for the first time.
A 2013 study found that Maine's school funding formula equitably distributes resources across the state, and "remains quite equitable compared to other states."
Many districts say they're thankful for the continued state support, and that the extra funding would go a long way towards supporting students and teachers.
But some leaders say this year's budget challenges highlight the need for the state to tweak its school funding formula moving forward, and to look at new ways of assessing the relative wealth and economic needs of families and communities.
Any potential changes to that formula would need to be approved by the legislature.