Legislative Wrap Up

(from Maine Townsman, May 1998)
By MMA State & Federal Relati
ons Staff

Maine's 118th Legislature, which adjourned "sine die" on April 9th, will undoubtedly go down in history as a legislature committed to restoration and repair.

Part of that reputation will be attributable to the significant financial commitments made towards repairing the state's infrastructure. Maine's public schools and its juvenile corrections facilities, the state's highways, the Capitol Building and its environs, the Criminal Justice Academy and the research and development capacity of the University of Maine - after years of neglect during the state's difficult financial times, these vital components of the greater Maine community received solid financial support from this Legislature.

Part of the legacy of the 118th will be attributable to it commitment to restore state government's own fiscal health. In 1991, the 115th Legislature "pushed" a one-month school subsidy payment into the next fiscal year to "balance" the state budget, at least on paper. This Legislature appropriated the money to "pull" that $40 million payment back into the appropriate fiscal year, removing a perennial liability from the state's annual audit. This Legislature also plunked nearly $20 million into the Rainy Day Fund, the state's only meaningful hedge against the sharp reduction in state revenues that can occur whenever the economy softens. Municipalities only have to think back over the last eight years to be reminded of the importance of stable state revenues. With this year's appropriation, the Rainy Day Fund is now showing a healthy balance of over $60 million.

But the principal commitment for which this Legislature will be remembered is its commitment to tax relief for Maine's citizens. $80 million that would otherwise accrue to the state's treasury each year will now stay in the wallets of Maine's citizens thanks to the action of this Legislature. Just as significantly, $46 million of that tax relief will be devoted to relieving the property tax burden on Maine's resident homeowners through the instrument of a $7,000 homestead exemption. By this action, the Legislature clearly recognized that the property tax, which of the state's three major taxes has been pulling 44% of the load in recent years, was appropriately first in line for relief.

But giving relief to the property tax - and giving that relief in the form of a locally administered homestead exemption - isn't necessarily a natural call for a state legislature to make. The sales tax and the income tax are directly under the control of the Legislature; the legislative influence on the property tax is indirect. Even though the sales tax is currently providing only 26% of the revenues derived from the three major tax sources, it would have been much more politically expedient for the Legislature to reduce the sales tax rate. Even though the Legislature did reduce the burden of the income tax by phasing in two increases to that tax's personal exemption, even greater reductions to the income tax burden would have been easier, politically, than providing property tax relief. The Legislature could have made these decisions with great fanfare, and written off the over-reliance on the property tax as merely a "local problem". Furthermore, even if the decision was made to give some relief to the property tax, the Legislature could very easily have created or expanded a property tax rebate program that would have kept the high property tax burden right where it is, but allowed the state to send checks back to the property taxpayers who qualified for the state benefit. Although a rebate system is an awkward way to provide tax relief, it would certainly maximize the state's conspicuous involvement in these tax relief efforts.

Given these perfectly natural obstacles to obtaining meaningful property tax relief at the legislative level, it is to the great credit of the Legislature and Governor King that direct and significant property tax relief was made a priority in 1998.

The homestead exemption was not the only legislative enactment that will provide some relief to the property tax. After seven years of state funding for K-12 education that has been tepid at best and flat at worst, this Legislature exceeded its self-imposed 5% cap on GPA increases and appropriated a 6% GPA boost for FY 99. A major legislative initiative that will see the state beginning to financially participate in public school renovation is fully described in the Education section of the following summary, under LD 2252. In another arena, municipal and county governments which send their police officers to District Court to aid in the prosecution of traffic violations will be reimbursed $25 a day for their costs rather than the paltry $10 per day "witness fee" they have received since the hourly rate reimbursement was repealed in 1991 to save the state some money.

And it is was not only in the area of intergovernmental financial relationships that the 118th Legislature was friendly to local government. Our effort with this edition of the Maine Townsman is simply to describe for the benefit of our readership the final outcome of all the legislation MMA's State and Federal Relations department was tracking that was ultimately enacted into law. We believe that the description that follows speaks for itself, and underscores the fact that this Legislature's list of accomplishments is long, and the breadth of its enactments is rich in detail.