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Maine Municipalities Face Grim Choices Under LePage Budget Plan
01/24/2013   Reported By: Jennifer Mitchell

About half of Maine's 490 municipalities are sitting down right now to hammer out budgets in time for their traditional March town meetings. But a proposal put forth by Gov. Paul LePage to balance the state budget is likely to affect all Maine communities. Under the two-year plan, town budgets across the state would absorb more than $400 million in cuts. As Jennifer Mitchell reports, that has some towns seeing red.

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As Dana Reed sees it, the math that lays out the state's obligations to local governments is simple: "Municipalities are supposed to receive five percent of all the income tax and sales tax revenue the state receives," he says. "And that's supposed to come off the top before there's transfer of the money to the general fund."

Reed is town manager for Bar Harbor, a town that doesn't receive much revenue from revenue sharing. But Reed says it has never disappeared completely. And now his office could face a hole of $200,000.

In nearby Winter Harbor, a much smaller town of just 500 people, town manager Cathy Carruthers says the village would lose about $11,000 in revenue sharing. "So they're smaller numbers than, like, big cities and stuff, but those numbers affect the small towns quite a bit," she says.

Winter Harbor, says Carruthers, would also be hit by a proposed change in how vehicle excise tax is collected. Under the LePage budget, taxes on some truck trailers would go to the state, creating a loss of $17,000. And there are proposed changes to education funding, and some expanded industrial equipment tax exemptions that will mean less tax money into town coffers.

"You package all those together and it's quite a blow to all municipalities in the state," says Geoff Hermon of the Maine Municipal Association. Hermon describes the proposed budget as a "shock to the municipal system." But more than that, he says local taxpayers would also be directly hurt.

The governor's plan calls for an end to the Homestead Tax Relief program for people under 65. It lowers all property tax valuations by a certain amount. Also at an end for most would be the Circuit Breaker Program, which provided a housing refund for low income Mainers. And then there's the elimination of the revenue sharing, which enabled towns to keep mill rates lower.

"Those three programs taken together are designed to take the regressive bite out of the property tax, and those three programs in this proposal are either being eliminated or very significantly reduced," Hermon says. "In my mind, in a very distinct way, this package of proposals is sending us back to the tax policies that were in place in the 1960s in this state."

Other effects would be felt by so-called "service center" communities, as they would lose significant amounts of general assistance reimbursement for state-mandated welfare programs, such as rent vouchers and emergency heating funds. Large cities, including Lewiston, Portland and Bangor, which historically receive a large reimbursement, would receive only about 50 percent under the governor's plan.

John T. Butler Jr., who sits on the Lewiston City Council, says the effects would be felt by the most vulnerable. "We have people that will not be able to afford their homes, and we have people that will have to make some choices between food, medicine, fuel," Butler says.

Lewiston is facing a possible loss of $5 million to $6 million total in state funsd. It's a similar story in Portland, where the city would have to account for $10 million in lost revenue, including $3 million of lost general assistance reimbursement.
City spokesperson Nicole Clegg says towns don't have a lot of options. "The only option we have available to us is property tax," she says.

Or they could cut services. In Fort Kent, a small community in northern Maine, town manager Donald Guimont says it's highly unlikely that townspeople would accept a tax hike to fill their $600,000 budget gap.

"We have a fairly conservative community - fiscally conservative community, and there's no way that entire amount would be passed on to the tax payers," Guimont says. "So it would have to be a combination of reductions with various departments, and what have you."

That could mean cuts to police, fire, road plowing and recreation. It's too soon to say just what services and positions would need to be cut. In fact, it's too soon to say what parts of the governor's plan will survive the scrutiny of the Legislature, which is now controlled by Democrats.

The city of Portland is taking its opposition to the State House, and the city of Lewiston passed a resolution this week opposing the governor's budget plan.

Mathew Pineo, town manager of Brownville, population 1,200, says that he's not even going to release the potential impacts to the town, lest it cause a panic among tax payers; rather, he says he will keep talking to the Legislature to assure that significant changes are made.


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