AUGUSTA — The Legislature’s Taxation Committee has unanimously rejected Gov. Paul LePage’s proposal to change the way cities and towns receive state money, the committee’s Senate chair said Monday.
In his $6.1 billion budget for the two years starting July 1, LePage proposed switching from a formula in which cities and towns get a percentage of state revenue to a fixed appropriation from the state.
That idea, vigorously opposed by the Maine Municipal Association, was rejected recently by the bipartisan group of lawmakers on the Taxation Committee.
“I don’t think any of us feel comfortable changing the formula at this time,” said David Trahan, R-Waldoboro, the panel’s Senate chair. “Changing the formula means communities would lose tens of thousands of dollars.”
Rep. Elsie Flemings of Bar Harbor, a Democratic member of the Taxation Committee, said the panel was told by municipal officials that they want the current system preserved.
“We felt strongly, as a committee, about upholding the promise and commitment the Legislature had made with municipalities across the state,” she said.
The revenue sharing formula has been used for nearly 40 years. It gives cities and towns more money when the economy is strong and less when it is not.
Sawin Millett, commissioner of the Department of Administrative and Financial Services, has said the administration proposed changing the system to provide predictability to cities and towns.
But at a public hearing March 1, municipal officials from across the state opposed the proposed change, saying they do not want to compete with all other state needs for funding every two years, as the change would have them do.
Rather than allot cities and towns 5 percent of state revenue, LePage has proposed setting an annual allocation from the state budget. Municipal officials noted that the state could opt to give them less than 5 percent of state revenue – as LePage’s budget would do.
LePage’s budget would give cities and towns more money in each of the next two years than they got in this fiscal year. But it would provide 33 percent less than they would receive under the 5 percent formula, based on projected revenue.
Under the current system, municipalities would get a total of $280 million over the next two years. LePage is proposing to allocate $188 million over the same period.
The Taxation Committee’s recommendation, like all tax-related proposals in the budget, will go to the Appropriations Committee for consideration. The two committees met in a joint session Monday and will meet again April 15.
The Appropriations Committee is not bound by the Taxation Committee’s recommendation, but it puts significant weight on unanimous committee reports like the one issued Monday.
While the Taxation Committee was unanimous in rejecting the change to revenue sharing, it was divided on the amount of money that should go to cities and towns each year. A majority of the members voted to support LePage’s recommendation for $94 million in each of the next two years, while a minority was not yet comfortable setting an amount.
“We are concerned about an unintentional shift of the burden onto property taxpayers,” said Rep. Seth Berry, D-Bowdoinham.
Cities and towns use state revenue to limit the amount of property taxes they must collect to fund services.
The Taxation Committee has yet to take a position on several elements of LePage’s proposed package of $203 million in tax cuts. The committee asked for another two weeks to work on elements of the proposal, including raising the estate tax exclusion from $1 million to $2 million and lowering the top income tax rate from 8.5 percent to 7.95 percent.
Trahan said a majority of the committee wants to report out a final package with $203 million in tax cuts, but it may be somewhat different from what LePage has proposed.
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