July 7, 2007
The Great Property Tax Swindle

By Rep. Sally Lewin

We Mainers are in the midst of a property tax crisis. Based on ability to pay, we face the highest property taxes in the country. We hear stories of older residents on fixed incomes being driven from their homes when their property taxes became unbearable. We also hear tales of younger citizens abandoning the dream of home ownership because of the tax liability.

We’ve been through a series of tax “revolts” in recent years, as soaring property taxes pushed Mainers to desperation. You may recall Carol Palesky’s tax cap initiative, which went to a voters’ referendum in November 2004. In the run-up to Election Day, terrified politicians attacked the initiative as a “meat ax” approach to controlling government spending. Governor John Baldacci tried to appease any angry electorate with a pledge – “I will lock the State House doors if the legislators try and leave without tax relief.” Television and radio were bombarded with anti-Palesky ads, paid for by groups that favor unchecked government spending.

To further undermine support for the initiative, Governor Baldacci announced a tax-control plan of his own. “I guarantee that additional state spending on education will result in property tax relief,” he declared.

The Palesky tax cap initiative was defeated, but it succeeded in bringing the property tax crisis to a head. Instead, voters approved an alternative plan by the Maine Municipal Association, calling for the state to pay 55 percent of public education costs, as the Legislature had promised to do years earlier. Funding was then in the vicinity of 40 percent.

The outcome of the election put pressure on the governor, who was forced to say that he “heard the voters’ wishes for tax relief” and was “going to make it happen.” In January 2005, as a new Legislature began, he brought forward a bill known as LD 1 – “An Act to Increase the State Share of Education Costs, Reduce Property Taxes, and Reduce Government Spending at All Levels.”

After LD 1 passed the Legislature, it was praised by the governor as “bold” and “historic.” One of the new law’s fundamental features was a huge increase in education funding from the state treasury. This increase came with one caveat – the money had to be used to reduce property taxes, as the voters had demanded.

For comparison, check out the change in school funding. In the governor’s first budget, for the 2004 and 2005 fiscal years, General Purpose Aid for Maine public schools totaled $1.43 billion. With LD 1 in full operation, funding leaped to $1.75 billion in the 2006-2007 budget. That was an increase of about $320 million, which got us part of the way to the 55-percent funding goal.

Naturally, we expected this significant increase to go strictly for property tax relief. After all, that was the deal. Unfortunately, we had been fooled. Before the “historic” LD 1 was passed by the Legislature, special interest groups had beavered away at the language, completely removing any mention of using the new funding for tax relief.

As a result, we got no property tax reduction. In many towns, taxes actually went up. In many others, they remained flat. Some municipalities and schools took this fiscal bonanza as way to hire more staff, buy new town vehicles and pursue other pet projects that will permanently increase their overhead costs.

Now let’s move on to the new budget, which took effect July 1. For this two year cycle, school funding ramped up again, by $248 million. We’re now at the $2-billion mark for a steadily declining school population, even after accounting for savings from school consolidation. We had 218,000 kids in the K-12 system in 1996. Today, we’re down to 197,000, with an unusually sharp drop coming over the next few years.

All told, state government has increased school funding over this four-year stretch by about $570 million to reach the magical 55-percent share of education costs. And spending will remain at that level.

Remember, the entire rationale for this huge expansion in school spending was to provide property tax relief. But that was before the special interest groups demanded the money with no strings attached – and got their way. Unless your town is run by unusually conscientious officials, chances are the flood of new money will bring little or no tax relief. It will be spent on other things.

We no longer hear the governor boasting about his “bold” and “historic” LD 1 initiative to help out homeowners and renters. It’s been as while since he said, “I guarantee that additional state spending on education will result in property tax relief.”

Instead, we have squandered hundreds of millions of dollars and increased state spending to unprecedented levels, with virtually nothing to show for it. This whole sorry episode is more than just a broken promise. It is an utter disgrace.

State Rep. Sally Lewin (R-Eliot), a third-term legislator, serves on the Health and Human Services Committee

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