- HOMEOWNERS WILL FEEL THE IMPACT OF BUDGET CUTS
-as seen in The Notes June 11, 2009

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Homeowners will feel impact of budget cuts
By Rep. Meredith Strang Burgess

Just since January, state revenues have nosedived by a staggering $1.1 billion below projections. The recession has walloped sales tax and income tax receipts, and the damage continues to mount. Faced with such a dramatic shortfall, the Legislature recently passed a new two-year state budget that rings in at $5.8 billion. That works out to a $500 million reduction from the current budget, which ends June 30. For the first time since the 1970s, state spending will decline.

Early on in the budget process, Governor John Baldacci announced he would veto any budget that contained broad-based tax increase, such as sales and income. Republicans opposed tax increases in any case, because raising taxes in a recession can make the situation even worse and Maine's taxes are already high. Without higher taxes and with gloomy predictions for state revenues in the next two years, the Legislature had no choice except to make deep cuts in spending.

Under our system, the governor submits a budget proposal in January, which the Legislature uses as a starting point for the final product. Republicans approached the process with the goal of setting careful priorities to protect Maine’s most vulnerable citizens and also protect the state's struggling taxpayers to the greatest extent possible. For guidance, we looked to our vision of "Common Sense Solutions for Maine’s Future." We did so understanding that the lack of common sense that so often characterizes decisions made in Augusta has long been eroding people’s faith in state government.

Under the operating principle of shared sacrifice, Republicans and Democrats worked together to spread the economic pain as broadly as possible to minimize an undue impact on any one group or sector. Still, with cuts of such huge magnitude, there was plenty of pain to go around. State workers took some of the heaviest hits. The 10 state shutdown days every year for the next two years translate to a loss of four weeks of pay. That's a nasty blow for employees living on the edge. They also will work under a total pay freeze for those two years, and they also will contribute 5 percent to 15 percent towards their health insurance, depending on income. Legislators fall under the same new insurance rules and will forego cost of living increases for the biennium.

Unfortunately, some of the economic pain will spread to schools, town halls and homeowners across the state. The total impact is expected to put $140 million worth of pressure on property taxes.

Consider school funding. General Purpose Aid (GPA) to education will increase next year from $983 million (including $27 million in stimulus money) to $1.002 billion. But the following year, state funding declines rather sharply, to $946 million. That means that schools will take a $56 million cut for the 2010-2011 school year. School districts would be well advised to plan ahead and adjust their budgets accordingly.

The governor's budget also made deep cuts in municipal revenue sharing, the Homestead exemption and the Circuit Breaker program, which provides property tax rebates to qualifying homeowners and renters. Republican budget writers on the Appropriations Committee, working with their Democratic colleagues night and day and over weekends, were able to limit some of the damage.

With regard to the Circuit Breaker, for example, the governor’s original proposal would have lowered eligibility to people making less than about $46,000. Legislators were able to retain the current eligibility level – $60,000 or less – in a tradeoff for a 20 percent reduction in tax rebates. The maximum rebate drops from $2,000 to $1,600.

Also, the governor proposed 10 percent cuts in the Homestead exemption in both years. Now, the exemption will remain at $13,000 next year, but will fall to $10,000 the following year.

When the governor unveiled his proposal, Republicans immediate expressed their determination to soften the impact on income taxpayers. Following through on those commitments, GOP legislators were able to make changes that will save Maine taxpayers $34 million in the areas of tax indexing and preserving conformity of the standard deduction to the federal tax code. We also were able to restore $6.2 million to state revenue sharing to municipalities that the governor had cut.

These may seem like very small victories for taxpayers, but they were hard-fought victories in a budget environment that often made this legislative session seem dismal and depressing.

 

 

Rep. Strang Burgess is a second-term legislator representing House District 108, which includes Chebeague Island, Cumberland, Long Island and part of North Yarmouth.