Citizen Initiatives in 2009

(from Maine Townsman, December 2008)
By Geoff Herman, Director, State and Federal Relations, MMA

Three municipally-related citizen initiatives will likely be certified as having the requisite number of valid signatures to be presented to state lawmakers in 2009. Two of those petitions were written and promoted by the Maine Heritage Policy Center, a self-described “research and educational organization whose mission is to formulate and promote conservative public policies.” The third initiative is being promoted by a group of people opposed to the school consolidation law as it was enacted by the Legislature in 2007 and amended in 2008. It is likely that all three initiatives will be rejected by the Legislature and therefore placed on the ballot for voter approval or rejection in November 2009.

What follows is a brief description of each initiative and an initial analysis of the initiative’s impact on municipal government.

TABOR II, An Act to Provide Tax Relief

Description. If adopted by the voters, TABOR II would amend the LD 1 spending limit system for the counties and municipalities as follows:

• It would not change the current method of calculating each municipality’s (or county’s) spending growth allowance, but it would cap each local government’s allowance at no more than the average real growth in total personal income (currently 2.28%) plus “forecasted inflation”. If that cap were in place today, no “growth allowance” under the LD 1 system could be greater than 4.63%.

• It would require the municipality or county to get approval at referendum in order to exceed the LD 1 spending limit. For the 430 municipalities with the town meeting form of government, the mandatory referendum approval would be in addition to the written ballot approval at an open town meeting as currently required.

• It would require municipal and county budgets to be prepared and presented at least two weeks before any budget meeting according to a “cost center budget summary format” prepared by the State Planning Office.

With respect to the state, the TABOR II initiative would:

• Recalibrate the state spending limit growth allowance:

– Under current law the state’s spending growth allowance is the average annual real increase in total personal income (2.28%) plus the 10-year average state population growth rate. That growth rate would be calculated today as 2.87%.

– Under TABOR II, the state’s spending growth limit would be the most recently calculated rate of inflation plus the 3-year average state population growth rate. That growth rate would be calculated today as 3.23%.

TABOR II would also:

• Apply the spending limitation separately to the state General Fund, Highway Fund and all Special Revenue Funds. Current law applies the state spending limits only to General Fund appropriations.

• Require a statewide referendum to ratify increases in the state spending allowance within each of the various state revenue funds.

• Require a statewide referendum to ratify any new taxes, any increases in tax rates or the repeal of any tax exemption if the net (projected) result is an annual increase in state General Fund revenue of .01% or more (approximately $300,000).

• Require a statewide referendum to ratify any increases in the gas tax rate, which is currently annually indexed to inflation in an automatic way. This provision could have a negative impact on the state’s Highway Fund, which would automatically result in a negative impact to the local road assistance program known as URIP because URIP is indexed to the Highway Fund.

• All required statewide referenda would have to be preceded by a pre-referendum statewide mailing to all registered voters providing notice of the referendum and impact projections.

Municipal impacts. The municipal impacts of this proposal are clearly more predictable than the impacts of the original TABOR initiative that was defeated by the voters in 2006. For the municipalities and the counties, the most significant element of this revised TABOR proposal is the mandatory referendum vote to exceed the LD 1 limit, rather than utilizing the written ballot at open meeting. These mandatory referenda could potentially create a significant amount of referendum balloting from December to June each year to finally approve county budgets, municipal budgets and school budgets. All that referendum activity is expensive and could make it difficult to adopt local government budgets in a timely manner.

An Act to Decrease the Automobile Excise Tax and Promote Energy Efficiency

Description. This initiative would change the motor vehicle excise tax rate structure as shown in Chart 1 on the following page:

The initiative would also exempt from excise taxes for the first three years all hybrid vehicles, fuel cell vehicles, hydrogen-fueled vehicles and vehicles getting 40 mpg or better.

Municipal impacts. If adopted by the voters, the excise tax rate changes would go into effect in January 2010 and motor vehicle excise tax collections at the local level would experience a 40% reduction.

If the reduction went into effect this fiscal year, the aggregate municipal impact would be a loss of $88 million, which is a staggering amount of revenue to take away from the maintenance and repair of local roads and bridges.

Although there are variations on a town-to-town level, on a statewide basis the actual municipal expenditures to construct, maintain (summer and winter) and repair Maine’s 14,000 miles of local roads and bridges is equal to the amount of revenue generated by motor vehicle excise tax collections plus the state-provided local road assistance (URIP).

In other words, motor vehicle excise tax revenues are used by Maine’s towns and cities to construct and maintain Maine’s local roads and bridges.

Therefore, if this initiative is adopted by the voters, each municipality will lose around 40% of its motor vehicle excise tax revenue beginning in January 2010. On top of that, funding levels under the state’s URIP program could be negatively affected by the TABOR II initiative (see above).

In short, this proposal will either lead to sharp increases in property tax rates or significant reductions in road and bridge construction and repair, or some degree of both.

Chart 1–Proposed Change to Motor Vehicle Excise Tax Rate Structure

Chart 1–Proposed Change to Motor Vehicle Excise Tax Rate Structure


An Act to Repeal the School District Consolidation Laws

Description. This initiative repeals the school consolidation law enacted in 2007 and restores the underlying SAD and CSD school district law that was repealed in the process of enacting the school consolidation law.

Municipal impact. The municipal impact on this repeal initiative is somewhat uncertain and difficult to analyze.

On its face, if the voters repeal the school consolidation law in 2009, the state’s laws governing the structure and governance of the public school systems would return to where it was in January 2007. Those laws authorized the creation, and governed the operations, of municipal schools, School Administrative Districts (SADs) and Community School Districts (CSDs).

Legal opinions will undoubtedly be sought by all partisans to this debate regarding the effect of the repeal on all Regional School Units created under the terms of the consolidation law, but it would seem reasonable to conclude that those RSUs were legally created. If the repeal initiative is adopted by the voters, school law would have to be subsequently amended to acknowledge the RSUs’ legal existence.

If the consolidation law is repealed, the financial penalties for not consolidating if required to do so would obviously be lifted, and the state would return to a more uniform property tax rate effort to generate each school system’s required local contribution. Also, the multistep “school budget validation referendum” process would no longer be mandated by the state.

If it is difficult to sort out all the legal ramifications associated with repealing a law enacted two years ago and since amended, the politics associated with repealing the school consolidation law are somewhat clearer.

Approximately 50% of Maine’s public school students, primarily in the more densely populated areas of the state (see map on page 17), go to schools that were exempted from the task of consolidating, including schools that were already serving 2,500 students or more, as well as the island schools and the “efficient, high-performing schools”. Presumably, therefore, approximately 50% of the state’s voting population is either indifferent to consolidation or leans supportive of consolidation for at least its theoretical benefits.

In addition, some of the 2008 amendments to the original school consolidation law, such as the option to create “Alternative Organizational Structures”, made the consolidation effort somewhat more palatable even in parts of rural Maine. The AOS approved on Mt. Desert Island is perhaps the most conspicuous example.

The remainder of rural Maine is largely exposed to the consolidation law and it is there where the opposition to the law is the strongest.

For all three initiatives: The issue of “Competing Measure”. In some cases, the submission of a citizens’ initiative to the Secretary of State and its subsequent certification has the result of paralyzing the Legislature from unilaterally amending the law that is the subject of the citizens’ initiative.

The issue is governed by the state’s Constitution which reads in pertinent part: “The (citizens’ initiative) thus proposed, unless enacted without change by the Legislature at the session at which it is presented, shall be submitted to the electors together with any amended form, substitution or recommendation of the Legislature, and in such a manner that the people can chose between the competing measures or reject both”. (Maine State Constitution, Article IV, Part Third, Section 18, subsection 2)

The clear purpose of this “competing measure” law is to create a level playing field between the Legislature and the initiators with respect to the public policy issue being debated. By this requirement, the initiators’ approach and the Legislature’s alternative approach to the question, if offered, can each be considered equally by the voters; the Legislature cannot influence the outcome of the initiated question by rushing to enact a manipulated version of the initiated question.

The practical effect of the “competing measure” law is less than perfectly clear, however, especially when the citizens’ initiative covers a very broad area of law. The proposal to repeal the school consolidation law, for example, covers in one way or another much of the law governing Maine’s public school systems. In theory, at least, any attempt by the Legislature to further amend the school consolidation law in any way after the Secretary of State certifies that petition (if that occurs) would be considered a “competing measure” and therefore could not be directly enacted. Instead, those changes would have to be sent out to the voters to compete on the ballot with the repeal effort.

The same type of restrictions would also apply with respect to unilateral actions by the Legislature in the areas of governmental spending limitations or the motor vehicle excise tax system if and when the initiatives advanced by the Maine Heritage Policy Center are certified by the Secretary of State. After certification, changes to the LD 1 system or excise tax laws could only be advanced by the Legislature to the voters as “competing measures”.