The Smart Money: How would loss of revenue-sharing funds hurt Maine towns?

Posted Wednesday, January 30, 2013 in Analysis

The Smart Money: How would loss of revenue-sharing funds hurt Maine towns?

by Gina Hamilton

A good percentage of Gov. Paul LePage's budget fix would be borne by the towns, as revenue-sharing funds would be canceled for the two years of the proposed budget. 

Revenue sharing is the amount of income tax and sales tax that is shared with municipalities. Every town gets a portion of these taxes, based on its population. So towns and cities with large populations get a greater share than those with tiny populations. The yearly revenue share for the city of Bath, for instance, was projected to be $577,580 for fiscal year 2013 before LePage announced his plan to eliminate revenue-sharing entirely. Over the two years, then, Bath (a city of about 8,500 souls) would lose a million dollars. Brunswick would lose over $2 million.

Unfortunately, things that municipalities pay for, from school support, to general assistance for the poor, to police and fire departments, to road repair and snow removal, all still have to be done. The losses from the state would either have to be cut from the towns' already skeletal budget, or raised in the form of property tax (and possibly local sales tax), or raised by issuing bonds that would put the cities and towns in debt.

A city the size of Portland would lose more than $4.5 million, or more than $9 million for the biennium. 

Few towns will have any option but to raise property taxes. This will filter down to renters, too, as landlords try to recoup their property-tax increases by charging their tenants more. In Bath, the average cost per citizen from the two-year curtailment of revenue sharing would be approximately $135 for every man, woman, and child in the city. Translated into property-tax increases, the average household could expect an increase in property taxes of more than $700. Since most homestead exemptions have also been eliminated in LePage's budget (except for the elderly and veterans), the poor will be hit even harder, as a percentage of increase in property taxes. For the average renter, the bite would be about $60 per month.

However, the budget has to be passed by the Legislature, and few legislators, who have to go home to the towns newly devastated by the loss of expected income, have much good to say about the plan to abandon revenue sharing, whether they are Republicans or Democrats.

For instance, Assistant Senate Minority Leader Roger Katz, R-Augusta, is opposed to the loss of revenue sharing. "It hurts large cities and small towns," he said. "It's important for us to come up with alternatives to cutting revenue sharing." 

Senate President Justin Alfond, D-Portland, says that the state has played with revenue sharing too many times. He has submitted a bill to make raiding revenue sharing much more difficult to do.

According to the Maine Municipal Association, millions have been taken from revenue sharing to balance the budget in the last four years, under both Republican and Democratic administrations. This year alone, $44 million was pulled from revenue sharing to balance the budget.

However, there is a difference between the loss of $50,000 and the loss of millions of dollars. Many municipalities have gone on record in council meetings to denounce what they consider the theft of funds that the towns have been counting on and budgeting for. 

House Majority Leader Seth Berry, D-Bowdoinham, said he had heard from municipalities in his district. 

"They are shocked," he said. "They are horrified, and they really want us to come up with alternatives at the state level so they don't have to pay for the bills that the state rightfully owes."

Developing a balanced budget, in the face of competing interests, is never an easy job for the Legislature. But many on both sides of the aisle seem to agree that abandoning Maine's towns and cities is not the way to do it.

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