AREA—Last week members of the Maine House of Representatives passed a bill that would restore $40 million in municipal revenue sharing – funds the state has appropriated to municipalities for four decades – despite assurances from Gov. Paul LePage that any bill which does not include an equivalent amount in spending cuts, would be vetoed.
The governor’s biennial budget reduced revenue sharing from $96 million to $65 million for the first year, which will drop another $40 million, to about $20 million in 2015, unless the Legislature finds a way to fill the gap.
That it’s not evident if the Legislature has enough votes to override the veto has towns around Maine worried as they begin drafting annual budgets. For many towns across Maine municipal revenue sharing contributes significantly to their cash flow and, despite its decline, remains their primary source of state funding.
The cuts have sparked fiery debates in the House, as concerned local officials find a way to absorb the cuts.
According to the an analysis drafted by the Maine Municipal Association, who has been a vocal critic of the cuts and launched a TV and radio campaign to put pressure on legislatures to halt them, Paris funds will drop from $211,370 to $65,037, Oxford $149,213 to $45,912, Norway $227,316 to $69,943, and Buckfield $112,655 to $34,663.
Last week, Paris Town Manager Amy Bernard said the town is preparing two budgets, with one which anticipates the cuts and would freeze hiring. .
In Norway, Town Manager David Holt said planning for the cuts has proved difficult. Following property tax valuations, state revenue is the town’s second largest source of funding. Without additional funding streams, a reduction in funding will likely mean reduced spending or higher taxes.
“It solves a state problem by taking away revenue sharing, but we all serve the same citizens. The things we won’t be able to do affect the same citizens the governor is suppose to be concerned about,” Holt said.
Last year, Holt said taxes were raised to maintain slightly less services. Though one position was eliminated at the town office, which has meant more responsibilities for the office staff, most of the cuts were reinstated by Norway voters, and taxes increased slightly as a result.
“It’s wrong to look at it as anything else than a tax shift from the state onto the towns,” he said.
Towns are hoping the issue will be decided one way or another long before budgets are due in June. Holt, for his part, doesn’t expect he’ll draft a contingency budget.
“All of our circumstances are different, so our solutions will be different,” he said. “It would be nice to tell the citizens at the town meeting with some certainty what’s going to happen.”
Michael Chammings, town manager for Oxford, said Oxford does not incorporate state revenue while calculating its budget, meaning certain services, programs, and projects aren’t tied to it.
While the town will likely see taxes rise from increases at the school, he said he doesn’t anticipate the scenario facing most towns: a spike in property taxes combined with a reduction in services.
Helping Oxford’s situation are revenues from the casino, which have helped absorb state deductions in revenue.
Chammings however says that even before the casino arrived the town was stable because it looked at cost savings at the transfer station and the with insurance rates.
“We’re very financially stable,” Chammings said.
“That’s what businesses and residents like to see,” he said.
Chammings also defended the cuts, arguing that drawing money from the state’s rainy day fund – legislatures have proposed using $21 million – would hurt the state’s credit rating. In the long run, Chammings said, cuts could help save the state money.
“It’s tough. Some of these towns, I can feel for them. The money that’s cut from this law has been around for 40 years,” Chammings said.
By law, Maine towns annually receive five percent of the total sales, income, and property tax collected by the state. The measure is suppose to ease the property tax after the state passed the expense of registering vehicles and other local permitting to towns.
In Buckfield, Interim Town Manager Cindy Dunn voiced the concerns of many small towns standing to lose money and already operating a “bare bones” budget.
Without increasing taxes, Dunn said the difference would have to be made up with cutting its road improvement plan and reducing staff.
“There’s no extra money. A rainy-day fund doesn’t exist,” she said.
Like Paris, Dunn said the she’ll ask the budget committee to draft a second, contingency budget in anticipation of the cuts.
Dunn said she can sympathize with the governor’s position – he needs to balance the budget too – but said the cuts being proposed had a harder impact on the local level than they did the state.
“Someone’s going to lose out, either on the local level, or the state level,” she said.