Small towns say loss of state revenue-sharing a blow to budgets

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NORWAY — Town Manager David Holt faced the difficult task of warning some of the town’s employees they could lose their jobs if Gov. Paul LePage’s budget proposal passes.

LePage has proposed eliminating revenue-sharing — state taxes shared with towns — for the next two years. The proposal is part of a $6.2 billion spending plan presented to lawmakers this past Friday.

Holt said most concerning was the lack of dialogue between the governor’s office and town officials. 

“I’ve never seen anything like it,” said Holt, who has been a town manager in Maine for nearly 40 years.

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All across small-town Maine, managers and selectmen face the grim prospect of a total loss of revenue-sharing.

For Norway, it means losing one police officer and one highway worker. It means the Town Office will be closed more often and townspeople will wait longer for services.

The elimination of state revenue sharing, designed to ease the ever-increasing burden of property taxes, is a big part of the governor’s proposal, but it’s not the only one that will hurt small-town Maine, Holt said.

Also in the package is a change in the state’s Homestead Exemption: The tax-relief program would apply only to those who are 65 or older. Currently, the program in Norway allows all property taxpayers to deduct the first $4,000 of value from their taxable property value, Holt said.

“Before we even start the discussion about how much money we are going to raise, we are all going to pay more, approximately $100 more,” Holt said.

He said combined with an expected $250,000 increase in the share the town must pay to the local school district, the revenue-sharing cut and the loss of the Homestead Exemption would profoundly affect the town, where the median income is 72 percent of the rest of the state.

And it comes at a time when a record number of homes in town are in foreclosure for not paying their property taxes, Holt said. “So, for us, raising property taxes just isn’t an option.”

Holt said the message he got from LePage was that the days of a state and local government partnership were over.

“Partnership?” Holt asked. “There’s not even a conversation anymore.”

He said LePage seemed to be including towns and cities in the group deemed unworthy of state support.

Greene Town Manager Charlie Noonan said the combined impact of LePage’s budget proposal — even if the town flat-funds its budget, which it has done for the past few years — would cause an automatic property-tax increase of $136 for a $100,000 home.

Noonan, who has been in town government for 30 years, said the governor’s proposal seems to ignore the fact that most of the revenue-sharing programs that were put in place decades ago were approved by statewide votes.

“My sense is, it’s like all politics,” Noonan said. “You throw out a big number and know you are not going to get it. It’s a political ploy. Someone, probably the Democrats, will have to come up with some revenue tax increase and the governor can say, ‘There, see: I didn’t do it.'”

Noonan said he has become accustomed to the game of the state passing the buck to the local government, which has no other place to pass it.

The original plan for revenue-sharing has been constantly scaled back over the years, he said. Between that and the state’s failure to fully fund education, the buck still stops with the local taxpayer, he said. 

“They raided that, I don’t know how many times,” Noonan said. “Property taxes don’t equate to your income level. You have folks who are on fixed incomes who are retired who really would be forced to sell their property or go out and un-retire and get another job, and that just doesn’t seem fair.”

In the Franklin County town of Wilton, the governor’s plan was causing concern for Town Manager Rhonda Irish. The loss of revenue-sharing alone would cut a $250,000 slice from the town’s $2.9 million budget.

If the town flat-funded its budget, which might not even be legally possible because of labor contracts and school budget obligations, the tax rate would still increase.

For a $100,000 home, the property tax would increase $86 under the governor’s plan, she said. It would be $129 increase for a $150,000 home and a $173 increase for a $250,000 home.

“Without cutting services, we are not going to be able to absorb the $250,000 potential loss to revenue-sharing,” Irish said. 

But, like Holt and Noonan, she recognizes LePage’s budget is only a proposal.

Democratic lawmakers in Augusta also make that clear. During a conference call with reporters Wednesday, they said they would look for other options.

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

“They are shocked,” he said. “They are horrorfied, 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.”

In a statement released by the office of Maine House Republicans in response to Democrats’ criticism of LePage’s budget proposal, House Republican Leader Ken Fredette, R-Newport, said, “We need to make state government sustainable.”

He added, “That means controlling spending and paying our bills, not implementing new taxes that Democrats hope Mainers won’t notice in order to feed their appetite for spending.”

sthistle@sunjournal.com

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