AUGUSTA, Maine - Gov. Paul LePage's state budget proposal ran into a wall of resistance today, as dozens of municipal officials turned out to oppose the elimination of as much as $160 million a year in municipal revenue sharing money that would instead be used to help fund income tax cuts. The money helps cities and towns hold down local property taxes. And many say they need revenue sharing just to survive.
As part of his plan to help fund a reduction in the state income tax for all Mainers, the governor wants to repeal a 43-year-old law - a law that allows the state's municipalities to receive a small percentage of the state tax revenue they generate to keep property taxes down.
LePage says that it would be great if that's what communities did with the money. Instead, he derides revenue sharing as "welfare" for municipalities that also works to divide them.
"We disagree with him on all those counts," says Geoff Herman. "We think there's a lot more to revenue sharing. There's a lot behind it with respect to the relationship between the two levels of government."
Herman, of the Maine Municipal Association, is leading the charge against the governor's plan to flat fund revenue sharing in the first year of the state budget cycle, at $62.5 million, while completely eliminating it in the second year.
But Richard Rosen, the governor's chief of finance, told members of the Legislature's Taxation and Appropriations committees that the plan is part of a larger tax strategy that will help lower the individual income tax for all Mainers by 40 percent and deliver tax relief directly to them, instead of filtering it through local governments.
"The theme that you see throughout this proposal with the income tax changes and with this change is to direct that relief to Maine residents," Rosen says, "to be able to provide directly in this particular case to a Maine resident, a Maine tax filer, a Maine renter, a Maine homeowner, that the Maine resident is receiving the maximum impact, the maximum value of the property tax relief, directly to them."
In a sense, LePage's plan is crafted to force local taxpayers to become less dependent on state funds used for municipal expenses, such as infrastructure, public safety and education. But economists, such as Garret Martin of the Maine Center for Economic Policy, says the loss of municipal revenue sharing does not translate into a dollar-for-dollar offset in the form of lower income taxes. And Mason says it will inevitably lead to to higher property taxes in all communities.
"Property tax increases are ones that will result from costs being shifted on to towns and municipalities, and so that's why the revenue sharing cuts are a concern," Martin says. "That also puts more pressure on education funding and school budgets and will likely see those costs pop up in the form of higher property taxes as well."
"Since when do we, as Republicans, talk about taking away from producers and redistributing income?" asked Bangor City Councilor David Neally. As a Republican, Neally says there is plenty of bipartisan opposition to the plan to eliminate municipal revenue sharing. In Bangor's case, Nealley says, the city delivered $80 million in sales tax to the state and deserves to get some recognition for promoting local initiatives.
For smaller communities, such as Madawaska, that lack major revenue sources, local officials struggle each year to keep property tax rates from spiraling out of control. Vince Frallicciardi is the chairman of the board of the Madawaska Town Council.
"After calculating the governor's proposed cuts, the new cuts that are coming up we stand to lose approximately $750,000 dollars - that's approximately 3 mils sir," Frallicciardi said. "With a town our size, that's detrimental. We're asking for help."
LePage hopes to provide help to communities by requiring them to tax certain non-profits - if they have them. Lawmakers are scheduled to hear more about that aspect of the budget plan later in the week.