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12/24/09
Town expecting cuts to state revenue sharing beyond 'natural' revenue reduction
In addition to an anticipated curtailment in state aid to education for the current fiscal year, Cape Elizabeth is expecting a cut in state revenue sharing that will affect municipal spending this year and next.
Gov. John Baldacci's supplemental state budget plan, slated for adoption by the Legislature in January, proposes a $27 million cut in state revenue sharing to municipalities, as well as other cuts that are intended to bridge a $400 million gap between estimated state revenue and the state's biennial budget enacted last spring.
Based on information provided by the Maine Municipal Association, the net impact of the proposed cuts in revenue sharing on Cape Elizabeth comes to $66,349.
The gross cut, $143,936 proposed for Cape Elizabeth, includes a $69,500 "natural reduction" in sharing that results from declining business revenue, and an additional $74,436 cut in revenue sharing.
The town budgeted $614,000 in state revenue sharing for the current fiscal year. State forecasts for revenue sharing for Cape Elizabeth last spring were $691,587, but the total projected now is $622,087 due to the natural reduction. "Our estimate was very close," said Town Manager Michael McGovern, in an e-mail to the Town Council and to state legislators representing Cape Elizabeth.
However, the additional cut in revenue sharing, over and above the natural reduction, could leave a $66,349 hole in the state revenue sharing line if the supplemental budget is approved.
"Our excise tax income as of Nov 30 was running $58,000 ahead of target, and other revenues are doing okay, so there is no need for panic - yet," McGovern's e-mail said.
Town officials may not be panicking, but neither are they smiling, and they plan to bring the disparity to the attention of state legislators. Revenue sharing should either rise or fall in response to economic conditions, McGovern said in an interview at Town Hall. But they should not be cut. "It's against the whole principal of revenue sharing," he said. "I hope the Legislature will see the unfairness of it."
In his e-mail, said the amount Cape Elizabeth is now scheduled to receive, if the Legislature approves the supplemental budget, is:
- $119,587 less than in FY 2009, or 17.8 percent;
- $192,543 less than in FY 2008, or 26 percent; and,
- Closest to the amount received in FY 1996.
"In fiscal 1996 Maine transferred $72.7 million in revenue sharing payments," McGovern said. "The amount proposed for fiscal 2010 is now $88.8 million, or an increase of 18 percent. Cape Elizabeth’s increase over this period is 1 percent."
The disparity is similar to what the Cape Elizabeth School Department realized last month when told to expect a $621,000 curtailment in state aid to education this year as part of the state's supplemental budget. School Department calculations show revised state spending for 2009-2010 to be $1,114 per Cape Elizabeth student, compared to $4,874 per average student in Maine.
"Proportionately bigger cuts have had to be sustained in this region," McGovern said.
More cuts to rent and property-tax rebate program
While he said he was concerned about revenue sharing, McGovern said he was equally concerned about the cut to the circuit breaker program also included in the governor's supplemental budget. Officially known as the Maine Residents Property Tax and Rent Refund Program, the program rebates to qualifying applicants a portion of what they paid in rent or property tax in a previous year. "The circuit breaker program has been immensely helpful to Cape Elizabeth households," McGovern said in his e-mail. "Back in 2005, the last year for which we had data, over $632,000 was received by over 874 households in Cape Elizabeth," he said.
According to information released by the Maine Municipal Association, rebates from the circuit breaker program were reduced by 20 percent by the Legislature last spring. In the governor's proposed budget, the $5.6 million circuit breaker cut would be accomplished by lowering the income threshold required for eligibility.
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