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Maine Gov's Revenue Sharing Plan Divides Legislative Republicans
04/15/2013   Reported By: A.J. Higgins

A rift has emerged within the Republican Party over Gov. Paul LePage's proposal to cut municipal revenue sharing with cities and towns by $198 million. One GOP leader at the State House has sponsored a bill that would restore those funds, and some Republicans are leaning toward increasing the state's lodging tax as a partial solution to solving the state's revenue shortfall. A.J. Higgins has more.

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The municipal revenue sharing fund cut is taking its toll on legislators, who hear almost daily from community leaders about how they cannot afford the tax shift contained in LePage's budget. More than 60 municipalities have already passed resolutions against the proposal, and Republican lawmakers are feeling the political heat.

"I don't think there's a Republican that I've talked to that wants to see the cuts go forward as they're currently proposed in the governor's budget," says state Rep. Dennis Keschl. Keschl is a Belgrade Republican who serves on the Legislature's Appropriations Committee. "I do think that there's some sense that perhaps there's going to have to be something there, because where do you get $200 million?"

Some Republicans are looking to the state's lodging tax, often described as an "exportable tax," since a substantial portion of the money it generates is provided by tourists. The lodging tax, at 7 percent, is the lowest in New England, which those in the tourism industry tout as an incentive to lure visitors to Maine.

But the spector of deep cuts to Maine's cities and towns is prompting one Republican leader to consider boosting the lodging tax.
"It may have to be," says Assistant Senate Minority Leader Sen. Roger Katz.

Katz, told members of the Legislature's Appropriations Committee last week that the revenue sharing cuts to Maine's cities and towns must be restored. Finding new revenues may be the only way to accomplish that goal, and raising the lodging tax to 10 percent would place Maine in the middle of the pack among the New England states, and generate as much as $20 million in new revenues, according to some state officials.

Katz also says he wants to return to a system that appropriates 5 percent of the sales and income taxes to municipal revenue sharing, rather than the current 3.6 percent, or sometimes less. He's sponsoring a bill that would create a trust to assure the share of local funds is set aside. Katz's bill does not contain a plan to cover the $200 million cost of restroing revenue sharing, but Katz says LePage might consider the lodging tax increase as a partial solution.

"The governor had to present a balanced budget and he made it clear from the beginning he wasn't crazy about this revenue suspension idea," Katz said. "So, yes, I think the governor is certainly open to other ideas."

LePage remains generally opposed to tax increases. As a guest on WGAN Radio in Portland on Saturday, Lepage acknowledged there are ongoing discussions, but said that he could not support raising taxes on businesses or the labor force, and place Maine even lower in the national tax rankings.

"So that leaves tourism," LePage said. "Right now tourism is the mumber one industry in the state of Maine and some would say that we need to tax it more, so they'd like to see (our state) go to 50th."

While lawmakers on the Appropriations Committee discussed Katz's bill, Republicans on the Taxation Committee closed ranks in opposition to removing the cut to cities and towns. Rep. Gary Knight, the lead GOP lawmaker on the panel, says local governments have been growing faster than state government, and that it's fair to ask municipalities to find some savings.

Appropriation House Chair Peggy Rotundo, a Democrat, disagrees, and says municipalities have already cut their budgets. "So we need to find alternatives, and I don't yet know what alternatives we will find - that's part of the work that we will be doing here in the coming weeks in Appropriations," Rotundo said.

The Maine Legislature is in recess this week, but some legislative committees do plan to meet.


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