(from Maine Townsman, June 2009)
By Geoff Herman, Director of State & Federal Relations, MMA
The theme of this legislative session, not surprisingly, was written in the ink of the economic downturn.
If you want to characterize the session, simply apply the terms “cut”, “reduce”, “deappropriate”, “transfer”, “freeze”, “eliminate” or "suspend” to all things governmental, such as state and local budgets, state and local programs, state and local employees and state-level financial support for public education and property tax relief programs.
If the intent was to make it clear that Maine’s lawmakers believe that state government should adjust to the economic reality by living within its means, that goal was achieved. While it is true that state government benefited from its share of federal “stimulus” dollars that helped soften the blow, particularly in the areas of public education and Medicaid-based services, the financial resources from Washington only went so far. For the cuts that still had to be made at the state level, Maine’s lawmakers were obviously cognizant of the economic pressures affecting their constituents, and state government was given no special exemption from negative impacts.
At the beginning of the session, both Governor Baldacci and key legislators made some strong claims about how they were going to balance the state budget during these tough economic times “without raising any broad-based taxes”. Unfortunately, when the Legislature makes sweeping cuts to many of the programs it supports, property taxes suffer from collateral damage. When the lawmakers take money dedicated to municipal revenue sharing to balance the state budget, or cut funding for such programs as Kindergarten-through-Grade 12 public education or the “Circuit Breaker” property tax and rent benefits, or jack down the value of the Homestead property tax exemption for Maine residents, an upward pressure is exerted on the state’s property tax burden.
In terms of quantity, an additional $140 million of that upward pressure is going to be placed on the property tax burden in Maine over the next two years as a result of the state budget. The magnitude of the reduction in state financial support is unprecedented. With over $115 million worth of cuts to municipalities and school systems, and well over $25 million of direct cuts to the property taxpayers themselves, municipal budgets will be characterized by austerity for several years to come, and reductions in municipal services and layoffs of municipal and school staff will continue. Ultimately, the local voters will decide the degree to which those state cuts will be absorbed by reduced local services or replaced with increased property taxes.
Inside the State House, as the state budget finally came into focus, some of these impacts began to be recognized. Toward the end of the session, the loud crowing about “not raising any broad-based taxes ” became much more subdued. More than a few legislators, in fact, began to clearly identify the negative impacts the budget will place on property taxes. Some even said they were sorry, but felt they had no choice. A full description of the impact of the state budget on property taxes and local government is found in the New Laws article in this edition of the Townsman, in the Appropriations Committee under LD 353.
Other Municipal Legislation. Without being able to prove any cause-and effect, it appears that the magnitude of the state budget issues cooled down the environment where other highly significant negative municipal legislation might grow. With a few exceptions, the legislative committees were very responsive to the municipal concerns, smoothed-out the sharply negative local impacts in the roughly-printed legislative proposals, and killed the highly-problematic bills outright.
A careful reading of the New Laws edition of the Townsman may uncover some other contenders, but what follows are a few examples of municipally related legislation that standout from under the shadow of the state budget.
Positive municipal legislation. In the positive category, MMA’s Legislative Policy Committee asked various legislative sponsors to advance eight separate legislative proposals in 2009. One bill was kicked out because it was a “competing measure” to the initiative to repeal the school consolidation law. Four of the Policy Committee’s proposals were adopted by the Legislature nearly
in whole cloth. Some progress was made on two additional fronts. A full description of the successful proposals advanced by
the Association’s Legislative Policy Committee are found in the following sections of the New Laws article in this edition of the Townsman.
Financial Calculations on the Cover
The cover of this issue of the Maine Townsman quantifies four categories of negative financial impacts to local government and property taxpayers associated with the biennial state budget enacted by the Legislature in late May. All financial data are obtained from LD 353, the enacted state budget, and its fiscal
note. Here is how those numbers were calculated:
Revenue Sharing. The $44 million cut to municipal revenue sharing is the sum of an $18.8 million “transfer” out of the Local Government Fund and into the state’s General Fund in FY 2010 and a similar $25.3 million transfer in FY
Property Tax Relief Rebates. The $30 million cut to property tax relief rebate programs is the sum of a $17.4 million biennial cut in “Circuit Breaker” property tax and rent benefits and a $12.6 million biennial cut to the Business Equipment Tax reimbursement Program (BETR).
Homestead Exemption. The 23% reduction in the value of the Homestead Exemption program, from a $13,000 to a $10,000 exemption beginning on April 1, 2010 will “save” the state (and cost the homesteaders) $6.9 million in FY 2011 (and each year thereafter).
School Funding. The calculation of a $78 million cut to school funding is not based on the difference between actual state funding and the “55%” state funding level. Instead, it is based on the reductions in the state’s General Purpose Aid to Local Schools (GPA) relative to flat-funding levels. For the current 2009 Fiscal Year, the state level of support for GPA was $956.5 million. According to the budget, the state’s GPA appropriation for FY 2010 is $947.4 million (representing a $9.1 million reduction) and the GPA appropriation for FY 2011 is $887.4 million (representing a $69 million reduction). If the gap to be measured was the difference between the actual state appropriations for GPA and the 55% funding level, the biennial difference between full funding and actual funding would be $295 million; $110 million in FY 2010 and $185 million in FY 2011.
LD 652, Building Code Fix-up. Sponsored by Representative Jayne Giles (Belfast), LD 652 fixes-up the legislation enacted in 2008 creating a uniform and enforced statewide building and energy code. A description of LD 652 is found under the Business, Research and Economic Development section of the New Laws article.
LD 715, Credit Cards at the Town Office. Sponsored by Representative Patsy Crockett (Augusta), LD 715 modernizes outdated credit card law and opens up the opportunity for municipalities and other units of government to provide their customers with the opportunity to make payments with credit or debit cards if those customers are willing to pay the credit card company’s “merchant fee”. LD 715 is described under the Insurance and Financial Services section of the New Laws article.
LD 1126, Keeping GPA Honest. LD 1126 makes it much harder for various state-level expenditures associated with public education to be classified as “miscellaneous costs” and swept into the school subsidy appropriation as though they were financial grants to local schools. Sponsored by Senator David Trahan (Lincoln Cty.), the theory of LD 1126 is that the General Purpose Aid for Local Schools appropriation should be just that…school subsidy that is more-or-less directly provided to the state’s public schools. LD 1126 is described under the Education section of the New Laws article.
LD 1242, Delegation of Municipal Review Authority . LD 1242 was sponsored by Representative Anne Haskell (Portland). The bill allows qualified municipalities to be “delegated ” certain development review authorities for major commercial development currently performed solely by the State Fire Marshal’s Office. The goal is to make the development approval more of a one-stop shopping process where the capacity for a professional review of construction plans exists locally. LD 1242 is described in the Criminal Justice and Public Safety section of the New Laws article.
LD 1290 and LD 545, Tax Exempt Institutions. LD 1290 was sponsored by Senator Lisa Marraché (Kennebec County.). The bill would have modernized, rationalized and expanded the applicability of a poorly written statute that allows municipalities in very limited circumstances to apply service charges against tax exempt organizations to cover some of the costs of providing municipal services to those exempt institutions. Unfortunately, LD 1290 was killed by the Taxation Committee, but a fragment survived. LD 545 is a portion of the original version of LD 1290 that got spun off as a separate bill and was sponsored by Senator Larry Bliss (Cumberland County). LD 545 repeals a unique property tax exemption enjoyed by hospitals that applies to real estate the hospitals may be leasing from commercial landlords. A description of LD 545 is found in the Taxation section of the New Laws article.
LD 808, Raiding the Local Government Efficiency Fund. LD 808 would have blocked the Legislature from continuing to raid the municipal revenue sharing dollars that were supposed to go into the Local Government Efficiency Fund. It also would have earmarked those revenue sharing dollars to the Municipal Investment Trust Fund (instead of the Local Government Efficiency Fund) which municipal officials believe would be less likely raided by the Legislature. Sponsored by Senator Margaret Craven (Androscoggin County), LD 808 was killed on the Special Appropriations Table, but one part of LD 808 was enacted as part of the two-year state budget (LD 353) and another element of the bill can be found in the economic development bond package that voters will be asked to ratify on primary day (June 8th) in 2010.
As to the first part, a provision in the state budget bill eliminates the provision of law that sets-aside 2% of municipal revenue sharing for the Local Government Efficiency Fund, effectively beginning two years from now in FY 2012. Until then, those revenue sharing funds will still be used to help balance the state’s budget.
As to the part of LD 808 that would have capitalized the Municipal Investment Trust Fund, the economic development bond package as developed in LD 913 will provide $3.5 million of funding for the new “Communities for Maine’s Future” program, which is something of a hybrid formed by marrying the Municipal Investment Trust Fund with other existing programs that provide grants for downtown rehabilitation and historic preservation projects. A full description of the municipal and school impacts of LD 353 (the budget bill) and LD 913 (the bond package, including the Communities for Maine’s Future Program) is found in the Appropriations section of the New Laws article.
LD 1495, Tax Reform. In order to provide increased stability, modernity, equity and balance to the state’s 50-year old tax code, municipal officials have been long-time advocates of comprehensive tax reform. LD 1495 is not the three-dimensional tax reform measure that municipal officials would have written, but even as a narrower type of “reform”, LD 1495 would help balance the income tax against the sales tax, provide somewhat greater stability to state revenue along with fairly significant relief in tax burden to Maine residents. A full description of LD 1495 is found in the Taxation section of the New Laws article.
Negative municipal legislation. One would think that with all the cuts to local government in the state budget, lawmakers would be sensitive about passing laws that drive up local costs and local litigation expenses. Although many legislative committees either expressed that sensitivity or acted accordingly, it was not universal.
LD 621, Rebuttable Cancer Presumption for Firefighters. Sponsored by Senator Phil Bartlett (Cumberland Cty.), and strongly advocated by a phalanx of uniformed firefighters conspicuously stationed on the third floor of the State House, LD 621 creates a statutory presumption that a firefighter, volunteer or career, who is diagnosed with cancer contracted the cancer as a result of firefighting. With the creation of the presumption, the municipality will now have to prove the cancer was caused by something other than the firefighter’s workplace in those cases where the cause of cancer is uncertain. The municipalities articulated a long list of objections to the bill, all of which were ignored by the Legislature which strongly supported the measure in both the House and Senate and among both Republicans and Democrats. Members from both chambers and both parties, along with the firefighters themselves, repeatedly stated for the record that there would be “no municipal costs” associated with this legislation.
That strongly-stated claim by many members of the Labor Committee directly contradicts the fiscal note placed on the bill by the Legislature’s non-partisan Office of Fiscal and Program Review, which reads as follows:
Unit Affected: Municipality
Local Cost: Significant statewide
Shifting the burden of proof that a municipal firefighter or volunteer firefighter contracted certain types of cancer as a result of employment as a firefighter from the claimant to the employer and/or the employer's insurer may represent an indirect modification of a municipal activity.
The indirect modification of local activities in this bill may represent a State mandate pursuant to the Constitution of Maine. Unless General Fund appropriations are provided to fund at least 90% of the additional costs or a Mandate Preamble is amended to the bill and two thirds of the members of each House vote to exempt this mandate from the funding requirement, municipalities may not be required to implement these changes.
Fiscal Detail and Notes
This legislation will increase costs to local governments in the form of both higher premiums for workers' compensation insurance and increased legal costs. The impact to individual municipalities can not be determined at this time and will depend on actual experience.”
A full description of LD 621 is found in the Labor section of the New Laws article. MMA is currently carefully reviewing the relationship between LD 621 and the prohibition in Maine’s Constitution against unfunded state mandates.
Last year’s statewide building code law had some minor flaws. Yet, the adoption of the law had been hard fought and the collective nerves of both legislators and lobbyists were very sensitive on this issue. Nevertheless, Representative Jayne Crosby Giles (Belfast) agreed that the minor flaws needed to be addressed and agreed to steward a building code clean-up bill, LD 652. Adding to the challenge were requests from both the new Building Code Board and the Revisor’s Office to use LD 652 as the vehicle to make even more changes to the statewide building code law. Rep. Giles accepted each new request with understanding and accommodation and was able to guide the legislation to enactment.
Changing the way things have always been isn’t easy. But, Representative Anne Haskell (Portland) quickly agreed to sponsor LD 1242, which gives qualified municipalities the option to become “delegated” to provide the fire code reviews for commercial development that the Fire Marshal’s Office has historically provided. Rep. Haskell skillfully guided this unanimous committee report and final enactment.
Representative Patsy Crockett sponsored LD 715, which removed an outdated statutory barrier preventing many municipalities from agreeing to accept payments from citizens via credit cards. Rep. Crockett was able to explain that LD 715 both increases administrative efficiency for municipalities while allowing citizens the convenience of using credit cards if that is their preferred payment method.
Senator David Trahan (Lincoln County) was characteristically passionate in his support as sponsor of LD 1126, a bill designed to make the General purpose Aid to Local Schools appropriation more transparent and more true to its original purpose.
It is politically unpopular to question legislation pursued by public safety personnel. Yet, sometimes that legislation is flawed. Such was the case with LD 621 which provides to firefighters a cancer “presumption” in workers compensation law. Senator Peter Mills (Somerset County) and Representative Andre Cushing (Hampden) are members of the Labor Committee which reviewed the bill. These legislators dramatically improved LD 621 from it original form. Their efforts, both in committee and in their respective chambers, ensured that municipal concerns were not dismissed.
Unanticipated State Aid Reductions
The final round of budget cuts to state aid programs may have created a budgeting and tax commitment, and possibly an LD 1, dilemma for some of the March town meeting communities.
Where March town meeting voters appropriated specific amounts for state revenue sharing and local road assistance (URIP), those figures may now be inflated. While they were good-faith estimates at the time, these town meeting-approved appropriations may be higher amounts than the communities can now expect to receive in fiscal year 2010 (for current FY ‘10 Revenue Sharing estimates, go to the MMA website, www.memun.org)
What steps can a community take to reconcile earlier state revenue estimates and the approved municipal budget as they approach tax commitment time?
The answer to this question depends on the wording of the articles appropriating state funds, on how much flexibility town meeting may have given selectmen for the use of surplus funds, and on how conservative town officials were in estimating these state revenues.
If the town meeting article identified a specific revenue estimate and that is what the town meeting approved, it would be best for town officials to plan to use that estimate, even if it is more than the current estimate. Budgeting involves estimating revenues and expenditures, and the amounts received and spent are seldom exactly on target. Fortunately, most town officials are conservative with these revenue/expenditure estimates, and so many towns end their budget year with fund balances that are sufficient to cover small-scale revenue shortfalls. The magnitude and unexpectedness of the state revenue reductions this year and the volatility of excise tax collections make this a particularly worrisome budget year as municipal officials head to tax commitment time.
The amount of property taxes raised does not have the same elasticity as other revenues. Once taxes are committed, that commitment number will fix how much property taxes can legally be raised for the year to support the municipal budget. Uncollected property taxes may impact this local revenue source, but generally, what is committed by the municipality is the property tax portion of the municipal budget.
If you are going into the tax commitment process and discover that you are significantly overestimating non-property tax revenues, you have two basic choices. You could call a special town meeting and ask for legislative authority to increase the tax commitment or draw down surplus funds to cover the unanticipated loss of state revenues. Alternatively, you could stick with the existing revenue estimates, knowing they are more than what you can realistically count on, and limit some of the budgeted expenditures to keep the municipal budget in balance.
The wording of your annual town meeting articles for appropriating non-property tax revenues and giving selectmen authority to use surplus funds to reduce the tax commitment should be reviewed. You may want to check with MMA Legal Services to see how much flexibility the municipal officers have regarding the municipal budget and tax commitment before calling a special town meeting.
LD 1 may add more confusion to this municipal budget dilemma. If your town approved a municipal budget that was under your property tax levy limit, but now, after factoring in the state aid reductions you see the need to increase the property tax commitment, then you will need town meeting approval to go over the LD 1 limit. So, if you are calling a special town meeting to get approval for additional property taxes, first run the new numbers against your LD 1 limit. If this town meeting action would put you over the limit, you need to include articles on the special town meeting warrant to raise and appropriate additional property taxes and to get LD 1 override permission.
Anti-Smoking Ordinances Encouraged
This session, the Health and Human Services Committee unanimously voted against a bill (LD 155) proposing to prohibit smoking on public beaches and in public parks. The Committee killed the bill, in part, because under home rule authority municipalities are fully authorized to enact ordinances regulating smoking in public areas within their jurisdiction. As much as the members of the Committee believe smoking restrictions in public parks is an important issue, they also believe it should be addressed locally.
As a result, the Committee sent a letter to MMA asking the Association to encourage municipalities to enact smoking prohibition ordinances. The city of Portland has enacted an ordinance prohibiting smoking at or within 20 feet of city-owned or maintained beaches, playgrounds and athletic facilities (exempting specifically designated areas at Hadlock field). A copy of the ordinance can be found on the City’s website at: http://www. ci.portland.me.us/hhs/parksordinace.pdf
Municipal officials interested in developing such an ordinance are welcome to contact MMA’s legal staff for advice and guidance.