The Legislature’s Taxation Committee has begun its work on comprehensive tax reform. By setting aside Mondays and Fridays for tax reform work sessions and perhaps an afternoon or two during the mid-week, the Committee has set an ambitious schedule for itself. The goal is to report out its tax restructuring bill in a month to six weeks, in time for the full Legislature’s consideration of the matter before adjournment.

On Friday, April 4, the Committee focused on the several outcomes the restructuring effort should achieve. After much discussion, the Committee settled on four:

• Address the over-reliance on the property tax among the three major sources of tax revenue (property, sales, and income);

• Reduce the volatility of state tax revenues (cutting the volatility in half, as it is presently measured);

• Provide greater balance to the income tax structure (slightly "decompress" or flatten the steep progressivity of the Maine’s income tax code);

•Address the overall tax burden; that is, the totality of the tax levy as a percentage of the state’s total personal income.

As the Committee bill is finally developed, necessary adjustments will be made to ensure the bill is "revenue neutral," meaning that when all the changes are taken together, the state’s system of taxation will demand no more revenues from the citizens and businesses of the state than the present system.

The Committee’s outcome goals are written out on pages of flip charts and taped to the walls of the Committee room. Under the "Balance the Property Tax" outcome, there are various sub-categories, including references to the varying mill rates throughout the state, property tax exemptions, "service center" issues, and Revenue Sharing.

The "Volatility Reduction" ideas include: strengthen the Rainy Day Fund; broaden the sales tax base; adjust the income tax rates; apply variable sales tax rates to certain retail sales; and consider applying the sales tax to certain "necessity" items presently exempt.

The Income Tax-related flip chart includes sub-categories labeled "progressivity," "flat tax," and "exempt retirement income."

The ideas under the issue of ‘overall tax burden’ include a reference to the Governor’s "revenue targeting" proposal, and the call to review sales tax exemptions, perhaps with the idea of reducing the sales tax rate.

On the following Monday, the Committee took up the volatility of state tax revenues as its first area of consideration.

Volatility (or elasticity) is measured as the ratio between increases (or decreases) in the state’s economy and the parallel increases (or decreases) in state tax revenues. The ideal is to have an elasticity of 1.0 1.2, meaning that the change in state tax revenues will be roughly proportionate to changes in the economy. Maine’s current elasticity factor, apparently, is closer to 4.0, which means that downswings our upswings in Maine’s economy have exaggerated effects on the stream of tax revenues that are used to fund state government. The Committee is considering a short-term goal of reducing the elasticity factor to 2.0.

The Committee discussed the three methods to reduce volatility:

• Expand the sales tax base so that state government is not so narrowly reliant on the sale of big-ticket commodities such as cars, appliances, and construction materials.

• Gently flatten out the steep progressivity of Maine’s income tax code.

• Build up a substantial reserve account in the state’s treasury to bridge over times of reduced state tax revenues.

The Committee ended its work on Monday with the goal of finishing this piece of the reform proposal by determining the appropriate size of the state’s reserve account and developing legislation that would: establish the fund; keep the fund automatically maintained at its proper level; and protect the fund from future legislative raids.

The next approach to volatility-reduction the Committee intends to review is expanding the sales tax base, either by removing exemptions or applying the sales tax to retail sales presently excluded from taxation.

LD 813, An Act to Define the Projects That Public Works Departments May Undertake Without Procuring the Services of a Registered Professional Engineer, was amended and unanimously passed by the Transportation Committee. The bill will permit towns to undertake public works projects costing up to $100,000 without receiving a stamp of approval from a licensed engineer.

The original bill raised the threshold that requires an engineering stamp on public works projects from $5000 to a value equal to 100 times the average weekly wage. Supporters of the change pointed out that the $5000 threshold was established during the 1930's.

The original bill carefully defined the work that could be performed without the approval of an engineer and let the dollar cap adjust for inflation using the average weekly wage standard. After the public hearing an amendment to further define the type of work to be performed was written by the bill’s sponsor, Senator Mills (Somerset), representatives from the engineering profession and several municipal public works officials.

The Transportation Committee debated the bill and amendment and chose to simply add language that states that public works projects costing up to $100,000 that do not pose an undue risk to public safety may be performed without the approval of a licensed engineer.

It has been pointed out that this does not mean every project under the $100,000 threshold may proceed without an engineering stamp. Infrastructure projects utilizing federal and state funds may require the approval of an engineer as a condition of accepting the grant or loan. But, the reality is that most public works infrastructure projects supported in part with federal or state funds cost more than $100,000.

The public hearing has been scheduled for LD 1742, An Act to Comprehensively Realign the Tax Structure of the State. The bill, which MMA had a hand in developing, has been described extensively in previous issues of the Bulletin and in the March issue of the Maine Townsman. Testimony in support or opposition to (or neither for nor against) the proposal will be heard by the Legislature’s Joint Standing Committee on Taxation on Wednesday, April 30, 1997, beginning at 12:30 p.m. in Room 113 of the State Office Building.

The following are brief updates on the status of some legislative proposals that MMA is tracking.

NOTE: No further action will be taken by the Legislature on bills that are reported as enacted, unanimous "Ought Not to Pass," or final "Ought Not to Pass." Bills that are reported with divided reports (where both a "majority" and a "minority" report come out of the committee) may face debate and further action on the floor of the House and Senate. Bills that are reported as unanimous "Ought to Pass" or as unanimous "Ought to Pass as Amended" will likely be enacted as reported out of committee, but could be taken up for debate and amended by the full Legislature.

LD 32 - An Act to Grandfather Ambulance Attendants from Additional Rulemaking - Enacted 3/27/97; PL 1997, c. 26 (with Amendment S-15, which changes the retroactivity date to August 30, 1996, and adds a fiscal note).

Criminal Justice

LD 56 - An Act to Increase the Fee That May Be Assessed against a Prisoner to Help Defray the Costs of Incarceration - Enacted (with Amendment H-102, which increases the maximum assessment for the cost of incarceration of a prisoner in a county jail to $80 to help defray the costs of incarceration, and adds a fiscal note).

LD 245 – An Act to Provide a Time Limit Extension for Basic Corrections Training – final disposition: Enacted 3/19/97, PL 1997, c. 14.

LD 705 – An Act to Amend the Laws Regarding the Approval Process of Budgets of School Administrative Districts – final "Ought Not to Pass."

Labor

LD 174 - An Act to Increase Health Insurance Benefits for Retired Educators – (divided report) majority "Ought to Pass as Amended." The amendment adds to the bill appropriations of $454,754 for FY 97-98 and $691,952 for FY 98-99, and a fiscal note.

LD 767 - An Act to Clarify Sanitary District and Sewer District Authority to Adopt Impact Fees – (divided report) majority "Ought Not to Pass."

State and Local Government

LD 344 – An Act to Amend the Report Criteria for a Municipality’s Annual Post-audit – unanimous "Ought to Pass as Amended." The amendment updates the information required in the municipal post-audit report in order to conform with current, generally accepted accounting principles.

LD 488 - An Act to Change the Laws Pertaining to the Issuance of Copies of Birth, Marriage or Death Certificates by Towns - Enacted 3/27/97; PL 1997, c. 32 (with Amendment S-21, which clarifies that a town clerk may charge an amount less than $7 for the first copy of a birth, marriage or death certificate and an amount less than $3 for each additional copy).

LD 892 – An Act to Require Municipalities to Purchase Insurance by Competitive Bidding – final "Ought Not to Pass."

LD 1105 – An Act to Exempt Public Airports with Approved Airport Layout Plans from Subdivision Review – Enacted 3/28/97, P.L. 1997, c. 51.

LD 97 - An Act Concerning the Taxation of Manufactured Homes That are Stock-in-Trade – unanimous "Ought to Pass as Amended." The amendment somewhat redundantly clarifies that a mobile home is exempt from taxation as "stock in trade" if it (1) is unoccupied; (2) was not previously occupied at its present location; (3) is not connected to water or sewer utilities; and (4) is owned and offered for sale by licensed seller of manufactured homes.

LD 222 – An Act to Exempt Public Water, Power or Light Systems from Municipal Taxation – final "Ought Not to Pass." (The Committee is retaining the concept, however, for consideration in its overall tax restructuring proposal.)

LD 287 - An Act to Improve the Administration of Tax Increment Financing – unanimous "Ought to Pass as Amended." In addition to a number of technical or updating changes to Tax Increment Financing law, the amendment "notwithstands" or overrides any local ordinance or charter that establishes an expenditure limitation as that limitation might apply to the distribution of Tax Increment Financing revenues in the case of an investment in shipyard facilities that exceed $100,000,000. The purpose of the amendment is to allow the TIF agreement between the City of Bath and BIW to go forward without violating the City charter, which provides for an annual expenditure cap of the previous year’s spending increased by no more than the Consumer Price Index. The amendment was offered with the unanimous approval of the Bath City Council.

LD 1011 - An Act to Ensure the Accurate Collection of Excise Tax on New Motor Vehicles – unanimous "Ought to Pass as Amended." The amendment authorizes but does not require a municipal excise tax collector to use the "Monroney label" (new car sticker) to establish the value of a new car for the purpose of determining the first-registration excise tax. The amendment contains a separate provision for alternative procedures for excising fleet vehicles.

LD 46 - An Act to Require Confidentiality of Law Enforcement Officers Involved in Motor Vehicle Accidents – (divided report) majority "Ought to Pass as Amended." The amendment replaces the bill; it adds to the laws regarding law enforcement officers’ automobile insurance rates, a reference to the general penalty that applies to a violation of those laws.

On April 3, the Agricultural, Conservation and Forestry Committee held public hearings on two LDs that address appropriate forestry practices of lands enrolled in the Tree Growth program.

LD 968, An Act to Require Recommended Silvicultural Stocking Standards on Land Ownerships Enrolled under the Tree Growth Tax Laws, promotes continuous forest productivity of land in the Tree Growth program by directing the Commissioner of Conservation to establish mandatory silvicultural stocking standards.

LD 1200, An Act to Reform the Maine Tree Growth Tax Law, establishes specific criteria for forest management plans that are necessary to qualify for the Tree Growth program. The bill further requires that the Maine Forest Service conduct periodic, random audits to determine compliance with the plans, and to report the results to the State Tax Assessor. Noncompliance will result in withdrawal of the land from tree growth classification and associated penalties.

The bills’ proponents, including loggers, several citizens, and the Forestry College Network, stated concerns that the State subsidizes poor forestry practices through the use of the Tree Growth program tax breaks. Supporters felt that landowners receiving the tax benefits should be required to adhere to higher forestry standards.

Opponents of the legislation included the Small Woodland Owners of Maine, loggers, Maine Foresters, and a representative of a paper company. The opposition testimony included concerns that if the Tree Growth rules continue to change on a regular basis, people will remove their property from the Tree Growth program, and as a result develop these lands.

The Committee will be holding a work session on these bills on April 29.

On Friday, April 4, the State and Local Government Committee held a public hearing on several bills that address the structure, accountability and budgeting processes of county government.

LD 70 – An Act to Change the Budgeting Process for York County.

This bill as amended by its sponsor would: 1) provide the budget committee final authority over the budget through the use of a simple majority vote over the commissioners’ budget changes; and 2) make changes to the process for notifying the public of budget committee public hearings. Supporters of the bill felt that the changes proposed by the bill would stabilize the budgeting process by establishing a system of checks and balances. Opponents were concerned that York County’s two-year old budgeting process is too new to determine whether or not additional standards for accountability are now necessary. Members of the Committee expressed an interest in receiving feedback from York County municipal officials on the proposed amendment.

LD 1359 – An Act to Amend the Androscoggin County Budget Process.

The bill would have amended the budget approval process for Androscoggin County by removing the requirement that the budget be submitted to the Legislature for final approval. However, the bill’s sponsor Representative Bouffard of Lewiston, requested that the Committee hold this bill until next session, to provide time for the completion of a salary survey project which is being conducted by two legislators.

LD 1358 – An Act to Amend the Procedures for Finalizing the Kennebec County Budget.

This bill eliminates the requirement that the county commissioners submit the annual county budget to the Legislature for approval. Kennebec and Androscoggin are the only counties that currently require legislative approval for their budgets. The bill merely eliminates the advisory budget committee and places responsibility for final budget approval on a budget committee composed of elected and appointed municipal officials. Supporters of the bill said that due to the legislators’ hectic schedules, they are not familiar nor involved enough with the entire budget process, and therefore those who are most familiar should be held accountable for making final budget discussions. Although the control over the budgeting process was noted as a strong point, some testimony addressed the necessity to tighten or redefine some of the other provisions of the bill including. No one testified in opposition of this bill.

LD 1408 - An Act to Redistrict Knox County and Provide for Five County Commissioners.

This bill would establish 2 new county district commissioners in Knox County to be elected in 1998. Supporters of the bill felt that a system of five commissioners would better represent all the residents of Knox County, while at the same time increase accountability. Opponents of the bill believed that the bill is unnecessary and not properly researched. According to opponents, the new districts, as specified in the bill, are "illegal" in that they do not meet population requirements. Opposition testimony also focused on the additional cost of two new commissioners to Knox County municipalities.

LD 702 – An Act to Amend the Penobscot County Budget Committee Process.

This bill makes changes to the laws governing the Penobscot County Budget Committee by: 1) defining the term "municipal official;" and 2) requiring the commissioners to hold one or more public hearings on the budget before December 1.

LD 706 – An Act to Amend the Washington County Budget Advisory Committee.

This bill allows a municipal officer elected as a member of the budget advisory committee to name a designee to serve on the committee. Concerns were raised on the qualifications of the designee. Opponents felt that it was necessary to define the criteria of the designee to be a municipal official, who has knowledge of the budgeting process and is from the same municipality as the elected budget advisory committee member.

LD 1591 – An Act to Amend the Washington County Budget Process.

This bill makes four changes to the Washington County budget approval process: 1) limits municipalities to one officer serving on the budget committee at any one time; 2) requires the county commissioners to publish the prior year’s budget and make copies available to the budget advisory committee and the public; 3) requires the county commissioners to meet with the budget advisory committee to negotiate the budget before December 15; and 4) authorizes the budget advisory committee to petition the Washington County legislative delegation to arbitrate and decide specific budget issues in dispute if the budget is not finalized by December 15. Opponents stressed concerns that municipalities paying larger percentages of the county budget should have more representation on the budget advisory committee.

MMA’s Legislative Policy Committee will meet on Thursday, April 17, 1997, from 1:00 to 4:00 p.m., at the Maine Municipal Association. Please contact your LPC representatives or MMA’s State and Federal Relations staff if there are legislative issues you would like to have discussed.

(The bill summaries are written by MMA staff and are not necessarily the proposed bill’s statement of fact or an excerpt of the statement of fact.)

LD 1746 – AN ACT to Amend the Laws Relating to Development and Centralized Listing of Municipal Ordinances That Apply to Forest Practices (Sponsored by Sen. Kilkelly of Lincoln; additional cosponsors)

This bill amends the laws relating to development of municipal timber harvesting ordinances by requiring the ordinances to be consistent with the definitions for forestry terms established in Title 12 MRSA sec. 8868, as well as those in rules adopted by the Department of Conservation. It also specifies a 30-day period within which the validity of the adoption of a timber harvesting ordinance may be challenged based on an alleged failure to comply with certain notice requirements. It also adds requirements to the notice and hearing procedures for adopting municipal timber harvesting ordinances. This bill reflects the municipal timber harvesting ordinance changes that were part of the Forestry Compact but does not include the rest of the Compact.

LD 1739 – AN ACT to Amend the Formula Determining the Local Share in the School Funding Process (Sponsored by Rep. Plowman of Hampden; additional cosponsors)

This bill provides that if a school administrative unit raises its state average mill rate the Commissioner of Education shall pay the entire school administrative unit’s state subsidy share to that school administrative unit without penalty.

LD 1769 – AN ACT to Authorize Additional Adjustments to the State Share of School Funding (Sponsored by Rep. Desmond of Mapleton; additional cosponsors)

This bill amends the adjustment provisions of the school finance laws as follows: (1) it requires the state share of subsidizable education costs statewide to be at least 50% annually; (2) it establishes a 5% incentive adjustment to promote administrative consolidation of schools within a school administrative unit; (3) it requires the Commissioner of Education to repay each school administrative unit the amounts withheld from that unit in fiscal year 1991-92 and establishes a 5-year repayment period beginning in fiscal year 1997-98; (4) it requires the commissioner to propose the legislation necessary to provide 100% state funding for any costs that school administrative units incur in implementing the system of learning results; (5) it establishes a one-year moratorium on new school construction funds until a statewide school facilities inventory and an independent evaluation are completed; and (6) it repeals the provisions related to adjustments for geographic isolation and nonpublic school service.

Part C of the bill repeals all sales tax exemptions and increases income tax rates to raise

revenue to implement the Maine Single-payer Health Care Plan.

The bill requires that this legislation be submitted to the voters of the state for acceptance through referendum.

LD 1757 – AN ACT to Further Maine’s Welfare Reform Initiatives and Establish Maine’s Temporary Assistance for Needy Families Program (Sponsored by Sen. Paradis of Aroostook; additional cosponsors) (EMERGENCY)

This bill establishes the Temporary Assistance for Need Families program and makes some changes in the program formerly known as Aid to Families with Dependent Children. These changes are required as the result of the passage by the federal government of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

LD 1733 – AN ACT to Allow Municipalities the Option to Require Residency for Those Who Submit Major Budget Requests to the Municipality (Sponsored by Rep. Winglass of Auburn; additional cosponsors)

This bill allows municipalities to require residency for officials and employees who submit major budgetary requests for the municipality.

LD 1777 – AN ACT to Permit the Creation of Cooperative Municipal Fire Districts (Sponsored by Sen. Daggett of Kennebec; additional cosponsors)

Enabling legislation providing for the establishment of multi-municipal fire districts.

LD 1742 – AN ACT to Comprehensively Realign the Tax Structure of the State (Sponsored by Rep. Vigue of Winslow; cosponsored by Sen. Goldthwait of Hancock) (MMA bill)

A comprehensive tax reform bill intending to accomplish three goals: (1) provide significant property tax relief to all Maine residents by means of a homestead exemption; (2) expand the sales tax base to reduce state tax revenue volatility; and (3) impose a greater equity of the property tax burden among all property owners by applying a service charge to improved property currently exempt from taxation. The bill by its terms is revenue neutral. For more information, see the March, 1997, issue of the Maine Townsman.

LD 1763 – AN ACT to Establish the Local Option Lodging Tax (Sponsored by Rep. Kerr of Old Orchard Beach; additional cosponsors)

This bill allows municipalities to adopt a local option lodging tax at a rate not to exceed 2% of the rental value of living quarters in a hotel, rooming house or tourist or trailer camp, within the municipal corporate limits. The voters of the town must approve this local lodging tax at a local referendum.

The tax applies to the sales of the same lodging services to which the state sales and use tax currently applies.

All the provisions regarding assessment, collection and enforcement of the state tax also apply to the local option lodging tax. The state shall assess and collect the local lodging tax along with the state lodging tax and return the revenue raised to the municipality. The municipality must notify the State Tax Assessor at least 90 days before the local lodging tax goes into effect to give the State Tax Assessor time to set up the procedures for administering the local tax.

The State Tax Assessor shall determine the amount of revenue raised by each municipality’s local lodging tax each month, subtract the administrative costs of the local tax and certify the amount to be returned to each municipality. The Treasurer of State shall pay that certified amount to each participating municipality each month.

The additional revenue raised by a local option lodging tax must be used by the municipality to finance specifically-approved major capital projects.

LD 1771 – AN ACT to Extend the Electric Rate Stabilization Program (Sponsored by Rep. Kontos of Windham; additional cosponsors)

This bill increases the amount of the moral obligation of the state that may be pledged to support electric rate stabilization projects from $264,000,000 to $330,000,000. The bill expands the group of eligible borrowers to include qualifying facilities that are municipal solid waste facilities financed by industrial development or exempt facility bonds. It extends the period during which certification of approval may be issued from February 1, 1997, to February 1, 1998.

Room 228, State House, 1:00 p.m.

Tel. 287-1635

LD 1668 – An Act to Authorize a Bond Issue to Assist Small Businesses in Improving Accessibility for Individuals with Disabilities and to Provide Loans to Individuals with Disabilities (Sponsor: JENKINS)

Room 427, State House, 1:30 p.m.

Tel. 287-1314

LD 1470 – An Act to Lower Property Taxes by Requiring School Boards to Purchase Certain Insurance from the State (Sponsor: NUTTING)

Room 120, State Office Building, 1:00 p.m.

Tel. 287-3125

LD 1688 – Resolve, to Promote School Choice by Establishing a Voucher Program (Sponsor: MACK)

Room 437, State House, 1:30 p.m.

Tel. 287-4149

LD 474 – An Act to Amend the Waste Management Laws Regarding Landfill Closure (Sponsor: MORGAN)

LD 1095 – An Act Concerning State Mandated Municipal Landfill Remediation (Sponsor: TUTTLE)

LD 1554 - An Act to Eliminate Inconsistencies and Unnecessary Duplication Regarding the Training and Certification of Individuals Who Enforce Land Use Regulations (Sponsor: ETNIER) (Department Bill)

LD 1621 – An Act to Clarify the Fine for Violation of Certain Land Use Laws (Sponsor: SKOGLUND)

LD 906 – An Act to Facilitate Removal of Certain Licensed Overboard Discharges (Sponsor: KONTOS)

Room 438, State House, 1:30 p.m.

Tel. 287-1327

LD 1384 – An Act to Reform Procedure in Multiparty Lawsuits (Sponsor: MILLS)

Room 425, State House, 1:30 p.m.

Tel. 287-1310

LD 250 – An Act Relating to the Collection of Initiative Petition Signatures at Polling Places (Sponsor: GAMACHE)

LD 1306 – An Act to Place Certain Restrictions on Persons Collecting Signatures on Election Day (Sponsor: TRIPP)

LD 1342 – An Act to Improve Procedures for Citizen Referenda and Initiatives (Sponsor: MILLS)

Elks Lodge, Community Drive, Augusta, 1:00 p.m.

Tel. 287-1312

LD 1175 – An Act to Remove the Large Lot Exemption from the Definition of "Subdivision" Within the Laws Administered by the Maine Land Use Commission (Sponsor: KILKELLY) (Department Bill)

Room 124, State House, 1:00 p.m.

Tel. 287-1331

LD 1670 – An Act to Limit Indemnification in Construction Contracts (Sponsor: PLOWMAN)

Room 120, State Office Building, 1:00 p.m.

Tel. 287-3125

LD 1207 – An Act Concerning Authorization of Educational Technicians (Sponsor: LEMAIRE)

State and Local Government

Room 334, State House, 1:30 p.m.

Tel. 287-1330

LD 1216 – An Act to Allow the Separation of Frye Island from the Town of Standish (Sponsor: MACK)

Room 221, State House, 1:30 p.m.

Tel. 287-1552

LD 1623 – Resolve, to Implement a Single State Tax System (Sponsor: BIGL)

LD 1631 – An Act to Reduce the Property Tax Burden for Maine Families (Sponsor: TREAT)

LD 1662 – Resolve, Establishing a Tax Force to Propose Targeting of Revenue Sharing Dollars to Communities that Accept Community-based Services (Sponsor: SMALL)

LD 1692 – An Act to Establish Municipal Cost Components for Unorganized Territory Services to be Rendered in Fiscal Year 1997-98 (EMERGENCY)

Room 437, State House, 9:30 a.m.

Tel. 287-4149

LD 1651 – Resolve, Directing the Department of Environmental Protection to Study and Make Recommendations on the Establishment of a Motor Vehicle Inspection and Maintenance Program to Meet the Requirements of the Federal Clean Air Act (Sponsor: ROWE) (Department Bill) (EMERGENCY)

LD 226 – Resolve, Requiring the Department of Public Safety, Chief of the State Police to Amend the Commercial Vehicle Inspection Standards to Help Control Diesel Truck Emissions (Sponsor: GAGNE)

NOTE: The Legislature is scheduling no public hearings during the week of School Vacation, April 21-25.

Weekly Schedules and Supplements are now available at the Legislature’s Internet Web Site: http://www.state.me.us/legis