Maine’s local property taxes could rise under Mills budget

Local property taxes could rise under Governor Janet Mills’ proposed state budget. Screenshot from Janet Mills for Governor campaign ad.

AUGUSTA – Some prominent lawmakers and experts on the Maine state budget are sounding the alarm that property taxes could rise under Janet Mills’ proposal to fund state government over the next two years.

On the campaign trail last year, Janet Mills and Democrat candidates across the state made property taxes a key talking point, attacking Republicans for not providing full revenue sharing to local communities and promising they would restore revenue sharing to target levels in the nearly fifty year-old program.

Along with the revenue sharing issue, Democrats also made a lot of noise during the election about pushing education funding higher, claiming Republicans had failed to meet the 55% state funding of local schools requirement that passed by statewide referendum in 1996.

Republicans took issue with Democrat characterizations of their positions, pointing to the fact that they had approved a budget that put revenue sharing on track to ratchet up and hit the target of 5% in funding to local governments in fiscal year 2020 mandated in state law.

In an op-ed in the Bangor Daily News, Rep. Sawin Millett, a former Commissioner of the Department of Administrative and Financial Services, who is known as perhaps the top expert on the state budget from any party in the Maine Legislature, said, “The proposed budget should also worry local towns and property taxpayers. Projected Revenue Sharing to municipalities is greatly reduced to make her budget look balanced on paper. Instead of increasing to the 5 percent in current law, it is only increased an anemic half-percent more than last year’s level of 2 percent. Even if revenue sharing is fully funded, there is no guarantee that new money to towns will actually reduce property taxes.”

The proposed budget should also worry local towns and property taxpayers. Projected Revenue Sharing to municipalities is greatly reduced to make her budget look balanced on paper.

Rep. Sawin Millet, former COmmissioner of the maine department of administrative and financial services, writing in the bangor daily news

Republicans were also quick to point out that under Governor Paul LePage, they had moved the state share of local education funding from 49.47% to 53.02% and that many had offered to move funding to 55% without raising taxes, but that Democrats had rebuffed them in favor of other priorities.

Yet for whatever promises Janet Mills and Democrats made on the campaign trail, Governor Janet Mills’ proposed budget falls short and is sounding alarms among those who are digging into the details.

The non-profit group Maine People Before Politics pointed out in their analysis of Mills’ budget proposal that Mills would cut revenue sharing transfers to local governments from the statutory 5% to 2.5% in fiscal year 2020 and 3% in fiscal year 2021 in her proposal. This amounts to a statutory reduction of $159.7 million in revenue sharing for local communities around the state from what the law says they would receive.

The group also cautions that Mills’ budget contains no language that would require local governments to dedicate revenue sharing funds to control or reduce property taxes, suggesting that local communities could instead use the funds to increase spending – which contradicts the stated purpose of the program.

MPBP’s concerns appear to be borne out by a report from the Maine Heritage Policy Center’s 2015 study on the correlation between revenue sharing and property taxes since 1973, which found that when revenue sharing increases, local property taxes also increase.

“As municipalities receive more funding, they are unable to resist their uneconomical urges, and unfortunately they send this money right back out the door, instead of using it to subsidize programs that are already in existence,” wrote Patrick Marvin, policy analyst at MHPC and author of the MHPC revenue sharing report.

In her budget overview presentation, Governor Mills expends little effort on revenue sharing, dedicating only three sentences to the issue, compared to fourteen paragraphs on issues related to Medicaid expansion and health care.

But the lack of property taxpayer protections and failure of the Mills administration to deliver on full revenue sharing in her budget proposal is not the only place experts are sounding alarms.

Mills’ budget proposal also proposes increasing the minimum teacher salary by more than 33%, from $30k per year to $40k per year with no funding source dedicated to helping local school districts pay for the increase.

Senator Jim Hamper of Oxford says Mills budget, “includes a mandatory increase in the minimum teacher salary from 30,000 dollars to 40,000 dollars. This raise will be funded on the backs of local school districts.

In previous budgets, Republicans made a conscientious effort to better target education resources to where they make the most difference – into the classroom. Mills’ budget will reverse this trend.”

The analysis of Mills’ budget proposal from Maine People Before Politics concurs with Sen. Hamper, saying that Mills’ proposal contains no suggestion for how communities would pay for the raises.

They say that local school districts will not just be on the hook to fund the raises for teachers whose salaries are below the new minimum, but that local school districts will be left holding the bag to pay for salary increases across the pay scale as all teachers will expect a similar increase.

MPBP says that because Mills proposes funding the raises through the regular essential programs and services budget formula, the proposal is “all-but-unfunded”.

Compounding that concern is that Mills’ proposal, while failing to reach the 55% state funding of local schools target, takes the first step toward creating a universal pre-K program.

Under Maine state law, no new programs for K-12 public education may be created without sufficient funding increases to fund those new programs, but the law makes no mention of new pre-K programs.

In her budget presentation, Gov. Mills says her goal is to, “ensure a quality education for every Mainer.”

While many may see Mills’ efforts to create a universal pre-K program statewide as a noble endeavor, the more than $40 million some say it is expected to cost appears likely to be hanging over the heads of local school budget officials.

A 2015 report from the National Institute for Early Education Research at Rutgers University actually said that the cost to serve 50% of low-income 3- and 4-year-olds would exceed $58 million, which, if applied universally in Maine would put the cost of serving all low-income 3- and 4-year-olds well over $120 million in 2020.

Governor Mills says that her plan to implement universal pre-K will be a four-year process, saying, “This process takes a responsible, first step in a four-year plan to fund voluntary universal pre-K.”

Already facing what many will see as a broken promise from Mills on 55% state funding for local schools, these school officials could now be put on the hook for a largely unfunded mandate made possible because the age of the students falls into a legal loophole for mandated state funding.

Added to this, concerns are being raised by some that a 2012 Obama administration study found that Head Start had “little to no effect” on key outcomes for pre-K students or their parents, and that students who did not attend a pre-K program quickly caught up to pre-K students in K-12 programs.

As state lawmakers wade into the budget process, the eyes of thousands of property taxpayers and local government officials will be on Augusta, with many working Mainers hoping that the decisions that are made will allow them to keep their heads above water.

However, as Sen. Jim Hamper said in the weekly Republican radio address on Gov. Mills’ budget proposal to spend virtually every penny of projected revenue, “This means that if our economy faces any hiccups or if any costs exceed what is projected, we cannot pay our bills.”

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