Wednesday, April 23, 2014
AUGUSTA — The House of Representatives gave initial approval Thursday to a controversial bill that would forestall a $40 million cut in state revenue sharing with cities and towns by tapping the state’s rainy day fund and an account designed to reduce income taxes.
Democratic proponents said the bill, L.D. 1762, should pass because cutting revenue sharing would force municipalities to raise property taxes or reduce spending on such services as education, police and fire protection, and road maintenance.
But opponents, mostly Republicans, argued that tapping into the rainy day fund – money set aside to cover budget shortfalls or other expenses – would damage Maine’s credit rating and make it more costly for the state to borrow money for transportation, economic development and other needs.
Some Republicans sided with the Democratic majority to support the bill, reflecting the political consequences of casting a vote that could be construed in an election year as favoring an increase in property taxes.
But others opposed it despite the political ramifications, including Rep. James Gilway, R-Searsport. “I know this vote today will be used against me, to defeat me in the upcoming election,” he said. “But I don’t care, because we need to get this right.”
Maine law says that 5 percent of the sales tax and income tax revenue collected by the state should be shared with cities and towns. But the state now shares only 3.5 percent, says the Maine Municipal Association, because the Legislature has held onto the money to use for the state budget. In 2012 alone, the state kept $44 million that should have gone to municipalities, the association says.
As a percentage of city and town budgets, state revenue sharing varies widely.
In Portland, which has a $215 million municipal budget, Mayor Michael Brennan said recently that the city will lose $3 million – 1.4 percent of its budget – if lawmakers don’t block the revenue sharing cut.
Other communities are more dependent on state funds. Presque Isle City Councilor Mike Chasse told lawmakers last month that revenue sharing cuts since 2008 accounted for about 12 percent of that city’s budget.
The bill considered Thursday would fill a shortfall in the state budget that lawmakers approved last year. In crafting the budget, lawmakers came up $40 million short and decided to give the job of finding the money to a special committee.
That panel, which met last fall, was supposed to review sales tax exemptions and tax credit programs and recommend changes that would generate $40 million in additional revenue. But the committee was unable to reach an agreement and, by default under the budget bill, the $40 million is to be taken from state revenue sharing.
The bill was the source of a squabble earlier this week when Democrats on the budget-writing committee voted on it Monday while Republican members were absent, prompting a full day of accusations and competing claims of dirty tricks and lying.
The fight diminished Tuesday when Sen. Patrick Flood, R-Winthrop, said the Republicans had missed the vote because of a miscommunication between him and Democratic leaders on the committee.
However, Thursday’s floor vote rekindled some of that fierce rhetoric, as Democrats gave preliminary approval to the bill on a 114-21 vote after nearly three hours of floor debate and nearly a half-dozen Republican attempts to delay the vote. Many Republicans spoke against the bill, but 30 of them joined the Democratic majority in the final vote. Some lawmakers left the chamber and were not recorded in the roll call.
Several additional votes are required for enactment. The bill next moves to the Senate, which could take it up as soon as Tuesday.
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