Governor John E. Baldacci March 3, 2004 A Responsible Solution Spending Reform and Property Tax...

Governor John E. Baldacci

March 3, 2004

A Responsible SolutionA Responsible Solution

Spending Reform andProperty Tax Relief

Spending Reform andProperty Tax Relief

Goals of Responsible Reform Goals of Responsible Reform

• Immediate, Targeted Property Tax Relief

• Longer-Term Property Tax Relief

• Competitiveness

• Immediate, Targeted Property Tax Relief

• Longer-Term Property Tax Relief

• Competitiveness

Elements of Responsible ReformElements of Responsible Reform

• Increase the State Commitment to Education

• Limit the Local Share of Education Costs

• Strengthen the EPS model of Funding by Including Special Education & Transportation

• Provide Incentives for Efficient Delivery of Education Services

• Increase the State Commitment to Education

• Limit the Local Share of Education Costs

• Strengthen the EPS model of Funding by Including Special Education & Transportation


Elements of Responsible ReformElements of Responsible Reform

• Limit Government Spending – All Levels

• Redirect and Target Property Tax Relief

• Repeal the Personal Property Tax on Machinery and Equipment

• Limit Government Spending – All Levels

• Redirect and Target Property Tax Relief

• Repeal the Personal Property Tax on Machinery and Equipment

• Increase General Purpose Aid to Education for FY05 by $25 Million

• Expand The Property Tax Circuit Breaker Program & Increase Funding for FY05 by $25 Million

• Increase General Purpose Aid to Education for FY05 by $25 Million

• Expand The Property Tax Circuit Breaker Program & Increase Funding for FY05 by $25 Million

Immediate, Targeted Property Tax ReliefImmediate, Targeted Property Tax Relief

• Increase the State Share of Education Costs to 55% by FY09-10

• Limit the Local Share of All EPS Defined Education Costs to 8.0 Mills or Less by FY09-10

• Strengthen the EPS Model of Funding by Including Special Education & Transportation


• Limit Spending at All Levels of Government

• Increase the State Share of Education Costs to 55% by FY09-10




• Limit Spending at All Levels of Government

Longer-Term Property Tax ReliefLonger-Term Property Tax Relief

• Repeal Personal Property Tax on Machinery and Equipment

• Lower Overall Tax burden


• Lower Overall Tax burden

CompetitivenessCompetitiveness

• Increase General Purpose Aid to Education by $25 Million for FY05

Current FY05 Budgeted Amount of $725,410,576

is Increased to $750,410,576

Result: An Additional $14,986,616 for Operating and Program Cost Distribution Over Commissioner’s Current RFL

• Increase General Purpose Aid to Education by $25 Million for FY05

Current FY05 Budgeted Amount of $725,410,576

is Increased to $750,410,576

Result: An Additional $14,986,616 for Operating and Program Cost Distribution Over Commissioner’s Current RFL

Key Education ComponentsKey Education Components

• Increase State Share of Education Costs to 55% by FY09-10

Provide the Increased State Share each Year Over the Specified Five-Year Period Necessary to Achieve the Statutorily Required 55% by FY2009-10

The Bill Does not Alter the Current Law Phase-in of

EPS but Will Require Additional State Share Each Year to Meet the FY2009-10 Required 55%

• Increase State Share of Education Costs to 55% by FY09-10

Provide the Increased State Share each Year Over the Specified Five-Year Period Necessary to Achieve the Statutorily Required 55% by FY2009-10

The Bill Does not Alter the Current Law Phase-in of

EPS but Will Require Additional State Share Each Year to Meet the FY2009-10 Required 55%



Establishes a New Method of Distribution for the State Share of Education Funding

Ensures That a Municipality, Single or Part of an SAU Will Not Be Required to Raise More Than 8.0 Mills of State Valuation for Their Share of Local Education Costs by FY2009-10

State Share Becomes the Difference Between the Established

Mill Rate Expectation and the EPS Defined Costs Each Year


Establishes a New Method of Distribution for the State Share of Education Funding

Ensures That a Municipality, Single or Part of an SAU Will Not Be Required to Raise More Than 8.0 Mills of State Valuation for Their Share of Local Education Costs by FY2009-10

State Share Becomes the Difference Between the Established

Mill Rate Expectation and the EPS Defined Costs Each Year


0

2

4

6

8

10

12

14

16

18

MIL

LS R

AIS

ED

FO

R E

DU

CA

TIO

N 2

00

3-0

4M

ILLS

RA

ISED

FO

R E

DU

CA

TIO

N 2

00

3-0

4

Maine’s Municipalities (each line represents five Units )Maine’s Municipalities (each line represents five Units )

Education Funding & Property Tax ReliefEducation Funding & Property Tax ReliefMunicipal Mill Rate Commitment to Local Education 2003-04Municipal Mill Rate Commitment to Local Education 2003-04

Bangor (12.39)Bangor (12.39)

Augusta (12.33)Augusta (12.33)

S. Portland (11.76)S. Portland (11.76)

Portland (11.21) Portland (11.21)

Lewiston (9.93) Lewiston (9.93)

Auburn (11.09) Auburn (11.09)

Based on 2003 State Certified ValuationBased on 2003 State Certified Valuation

J.E. Rier 2-27-04Department of Education

Hallowell (16.20)Hallowell (16.20)

Thomaston (16.36)Thomaston (16.36)


Transportation Model Enacted This Session With Refinements Before Implementation of EPS FY06

Special Education Program Changes Now With Fiscal

Reform to Be Enacted Next Session Before Implementation of EPS in FY2005-06

Continue to Guide EPS Development With the Adequacy and Equity Goal for All Students


Transportation Model Enacted This Session With Refinements Before Implementation of EPS FY06

Special Education Program Changes Now With Fiscal

Reform to Be Enacted Next Session Before Implementation of EPS in FY2005-06

Continue to Guide EPS Development With the Adequacy and Equity Goal for All Students



Efficient School Units

Regional Collaboratives

Regional School Districts


Efficient School Units

Regional Collaboratives

Regional School Districts


• Existing Efficient, High Performing School Units That Agree to Mentor Others Qualify for:

Under 1,000 Students 5% GPA Bonus for 5 Years State Assumes 25% of Local Construction Debt

1,000 to 2,500 Students 7.5% GPA Bonus for 5 Years State Assumes 25% of Local Construction Debt

2,500 + Students 10% GPA Bonus for 5 Years State Assumes 50% of Local Construction Debt

• Existing Efficient, High Performing School Units That Agree to Mentor Others Qualify for:

Under 1,000 Students 5% GPA Bonus for 5 Years State Assumes 25% of Local Construction Debt

1,000 to 2,500 Students 7.5% GPA Bonus for 5 Years State Assumes 25% of Local Construction Debt

2,500 + Students 10% GPA Bonus for 5 Years State Assumes 50% of Local Construction Debt

Efficient School UnitsEfficient School Units

• Five + School Administrative Units w/ Combined Enrollment of 2500+ That Agree to Cooperate in the Delivery of Administrative and Other Services

Salary and Benefits for One FTE Regional Staff Declining Scale for Five Years

Additional 25% Tuition Reimbursement Graduate Courses

State Purchase of Region-Wide Software

State Provides Technical Assistance and Training

State Grant Programs Favor RCs

• Five + School Administrative Units w/ Combined Enrollment of 2500+ That Agree to Cooperate in the Delivery of Administrative and Other Services

Salary and Benefits for One FTE Regional Staff Declining Scale for Five Years

Additional 25% Tuition Reimbursement Graduate Courses

State Purchase of Region-Wide Software

State Provides Technical Assistance and Training

State Grant Programs Favor RCs

Regional School CooperativesRegional School Cooperatives

• Combine Two or More Contiguous School Administrative Units

• Adopt 1 Governing Body, 1 Budget

1,000-2,500 Students 7.5% GPA Bonus for 5 Years State Assumes 25% of Local Construction Debt

2,500 + Students 10% GPA Bonus for 5 Years State Assumes 50% of Local Construction debt

• Combine Two or More Contiguous School Administrative Units

• Adopt 1 Governing Body, 1 Budget

1,000-2,500 Students 7.5% GPA Bonus for 5 Years State Assumes 25% of Local Construction Debt

2,500 + Students 10% GPA Bonus for 5 Years State Assumes 50% of Local Construction debt

Regional School DistrictsRegional School Districts

• 2004-05 1/2% of GPA

• 2005-06 1% of GPA

• 2006-07 2% of GPA

• 2007-08 2% of GPA

• 2008-09 2% of GPA

• 2009-10 2% of GPA

• 2004-05 1/2% of GPA

• 2005-06 1% of GPA

• 2006-07 2% of GPA

• 2007-08 2% of GPA

• 2008-09 2% of GPA

• 2009-10 2% of GPA

Fund for Efficient DeliveryFund for Efficient Delivery

Fiscal YearFiscal Year Amount of FundsAmount of Funds

• Expand Property Tax Circuit Breaker Program

Additional $25 Million for FY2005

Increase Maximum Refund from $1,000 to $2,000

Increase Income Eligibility from #30,300(s) / $46,900 (j) to $75,000 (s) / $100,000 (j)

Increase Household Eligibility

• Expand Property Tax Circuit Breaker Program

Additional $25 Million for FY2005

Increase Maximum Refund from $1,000 to $2,000

Increase Income Eligibility from #30,300(s) / $46,900 (j) to $75,000 (s) / $100,000 (j)

Increase Household Eligibility

Circuit Breaker ProgramCircuit Breaker Program

• Limit Spending for Municipal and County Budgets

Modeled on Current State Cap

Cap is 4.67% for FY2006-07 and 5.17% for FY2007-08

• Limit Spending for Municipal and County Budgets

Modeled on Current State Cap

Cap is 4.67% for FY2006-07 and 5.17% for FY2007-08

Limit Government SpendingLimit Government Spending


Repeal Effective April 1, 2004

BETR qualified Equipment Becomes Tax Exempt as it Exits The BETR Program

Towns reimbursed 50%

State Savings of $3.7 Million in FY2007 and $11.0 Million in FY2008


Repeal Effective April 1, 2004

BETR qualified Equipment Becomes Tax Exempt as it Exits The BETR Program

Towns reimbursed 50%

State Savings of $3.7 Million in FY2007 and $11.0 Million in FY2008

CompetitivenessCompetitiveness

Why Focus on Tax Relief ?Why Focus on Tax Relief ?

• Tax Burden 20% Above US and Among the Highest in the US for a Decade

• Property Tax Burden Among the Highest in the Nation

• Two Citizens’ Initiatives Demanding Property Tax Relief

• Maine’s High Tax Burden Weakens Our Competitive Position

• Tax Burden 20% Above US and Among the Highest in the US for a Decade

• Property Tax Burden Among the Highest in the Nation

• Two Citizens’ Initiatives Demanding Property Tax Relief

• Maine’s High Tax Burden Weakens Our Competitive Position

State & Local Taxes as % of Personal Income

0

2

4

6

8

10

12

14

1970 1975 1980 1985 1990 1995 2000

Maine and US Avg.

US Ave.

Maine

Maine Rank in S&L Taxes as % of Personal Income

96 6 5 5

7

1214

11 12

6 7 7 68 7

5 53 4

6 5 4 4 3 2 2 1 1 1 1 1 2 1

0

5

10

15

20

25

30

35

40

45

50

1970 1975 1980 1985 1990 1995 2000

Why Focus on Competitiveness ?Why Focus on Competitiveness ?

• Per Capita Income 10% Below US

• 1/3 of Jobs Do Not Pay Livable Wage

• Industrial Productivity 70% of US

• Lost 1/3 Manufacturing Jobs Since 1989

• Cost of Doing Business 10% Above US

• Our Manufacturing Job Loss Much Worse Than US

• Per Capita Income 10% Below US

• 1/3 of Jobs Do Not Pay Livable Wage

• Industrial Productivity 70% of US

• Lost 1/3 Manufacturing Jobs Since 1989

• Cost of Doing Business 10% Above US

• Our Manufacturing Job Loss Much Worse Than US

Per Capita Personal Income Gap(Pct. Points Me. PCPI Lags Natl. Avg.)

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02

Percent of Maine Jobs that Pay a Livable Wage, 1995-2002

65% 66% 67% 68% 67% 67% 67% 66%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

pe

rce

nt

85%

Benchmark

Manufacturing Value Added per Manufacturing Worker, Maine and U.S., 1989-2001

$0.00

$10,000.00

$20,000.00

$30,000.00

$40,000.00

$50,000.00

$60,000.00

$70,000.00

$80,000.00

$90,000.00

$100,000.00

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

do

llars

Benchmark: The value added per manufacturing worker in Maine will increase to within 10% of the value produced by manufacturing workers in the U.S. by 2005

Maine

United States

Gap: 30%

Index of Maine & US Manufacturing Employment (1960=100)

60

70

80

90

100

110

120

130

140

1960 1970 1980 1990 2000

US Maine

Cost of Doing Business, Maine, 1989-2002

108.7

106.3

75

77

79

81

83

85

87

89

91

93

95

97

99

101

103

105

107

109

111

113

115

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

inde

x po

ints

United States (100 index points)

Benchmark: The cost of doing

business in Maine will decrease to less

than 103 index points by 2005

103

110.1

Why Focus on Education Spending?Why Focus on Education Spending?

• Largest Part of State and Local Budgets

• Expenditures Increasing Rapidly

• Enrollments Are Declining Rapidly

• Largest Part of State and Local Budgets

• Expenditures Increasing Rapidly

• Enrollments Are Declining Rapidly

Maine State Expenditures(2002 General Fund)

Education, 36%

Human Services, 22%

Higher Educ., 9%

Admin. , 7%

Mental Health, 9%

Corrections, 4%

Other, 13%

Source data: Me. Bur. Of the Budget

Maine Municipal Expenditures(2002 Survey Estimates)

Education, 61%

Public Works, 11%

Genl. Admin., 9%

Public Safety, 9%

Other, 10%

Source data: Me. Municipal Association

Maine Municipal Expenditures by Population Size(2002 Survey Estimates)

47%

58% 57%66%

71% 71%67%

10%

9% 11%

12%11% 12%

15%

17%

10% 9%

7%6% 6% 7%

13%11% 11%

7%5% 4% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20+ 10-20 5-10 3.5-5 2-3.5 1-2 <1

Population in Thousands

Public Safety

Gen. Admin.

Public Works

Education


Statewide K-12 Education Expenditures(in millions of $)

$339

$486

$841

$1,084

$1,347

$1,684

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

1978-79 1983-84 1988-89 1993-94 1998-99 2002-03

Statewide Special Education Expenditures(in millions of $)

$17

$36

$85

$133

$186

$247

$0

$50

$100

$150

$200

$250

$300

1978-79 1983-84 1988-89 1993-94 1998-99 2002-03

Real K-12 Expenditures vs K-12 EnrollmentIndexed to 1978-79 =100

0

20

40

60

80

100

120

140

160

180

200

1978-79 1983-84 1988-89 1993-94 1998-99 2002-03

Expenditures

Enrollment

3 Ways to Reduce Burden3 Ways to Reduce Burden

• Eliminate or Cut Programs

• Find Efficiencies Consolidation / Regionalization

• Increase Income

• Eliminate or Cut Programs

• Find Efficiencies Consolidation / Regionalization

• Increase Income

Maine County Expenditures(2001 Survey Estimates)

Jails, 32%

Sheriff, 21%Employee Benefits, 10%

Other Admin., 13%

Dist. Attorney, 4%

Registry of Deeds, 4%

Other, 16%


Governor John E. Baldacci March 3, 2004 A Responsible Solution Spending Reform and Property Tax...

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