AUGUSTA — A Republican-sponsored bill could become a compromise to Gov. Paul LePage’s widely unpopular budget plan to suspend state aid to Maine’s cities and towns for two years.
Sen. Roger Katz, R-Augusta, is sponsoring legislation that would reaffirm the state’s decades-long commitment to distribute 5 percent of its sales and income tax revenue to municipalities.
The governor’s plan would suspend that revenue sharing so the state can save more than $200 million to balance the next two-year budget.
Katz’s bill, L.D. 713, appears better positioned to pull together competing political forces that will be crucial to forging an agreement on the state budget plan: the Legislature’s Democratic majority and Republicans.
Democratic lawmakers have called the governor’s plan a massive tax shift to cities and towns. Republicans also are unenthusiastic about suspending revenue sharing, and some have offered only tepid support.
The reaction reflects the fact that LePage’s proposal offers almost no political cover for lawmakers, whose home districts could end up with significantly higher property taxes or cuts to municipal services.
Katz, a former Augusta mayor who’s now the assistant Republican leader in the Senate, said Tuesday that he submitted the bill before the governor released his budget plan in early January.
He could have withdrawn it after LePage proposed his budget, but instead he sought key co-sponsors, including House Speaker Mark Eves, D-North Berwick, who said Tuesday that he signed on about two weeks ago.
The bill also has Republican co-sponsors who have shown a willingness to collaborate with Democratic lawmakers.
Katz said he submitted the bill because previous legislatures have ignored the revenue-sharing statute to balance the state’s budget.
“Just like the federal government saddles states with its deficit problems, it’s been easy for us to pass our problems on to the local governments,” Katz said. “But the buck really does stop there. The inevitable result is either that local services get cut more or the property taxes go up.”
Katz said said suspending revenue sharing for two years would create an imbalance of revenue coming from property taxes.
“It’s easy to say you’re against cutting revenue sharing,” he said, “but it’s incumbent upon us to be part of the solution to solve the deficit.”
Eves’ support adds momentum to the proposal. The speaker acknowledged Tuesday that Katz’s bill could be negotiated into the budget after it goes through a public hearing.
“It wouldn’t be unusual for that to happen, particularly because this is a front-burner issue in the budget,” Eves said. “This is the first thing that people are wanting us to talk about and resolve. …”
Municipal revenue sharing has been the primary point of contention in a budget proposal that’s full of them. Cities and towns are nearly united in opposing the measure, and several local governing boards have adopted resolutions making that rejection official.
The Maine Municipal Association has argued that the governor’s proposal violates a state-town compact that has existed since the late 1970s.
That’s when the Legislature moved from providing municipal aid with a straight allocation in every two-year budget to the revenue-sharing plan that exists today.
The change created a trust fund that distributed 4 percent of the state’s income and sales tax revenue to towns and cities. In 1983, the Legislature increased the share to 5 percent.
Over the last four years, the Legislature has diverted money from the trust fund to balance the state budget. The current budget, which ends June 30, has municipal revenue sharing at about 3.5 percent, according to the Maine Municipal Association.
Katz’s bill is designed to return the funding level to 5 percent, but not immediately.
It would maintain the 3.5 percent for the first year of the two-year budget beginning July 1, increase the level to 4 percent in the next fiscal year, and to 5 percent in fiscal year 2015-16.
The mechanism may seem arcane, but Katz hopes it will help draw broad support by allowing lawmakers to resume full funding of municipal aid while weathering the state’s current fiscal struggles.
It’s not clear, however, whether the plan would produce savings equal to LePage’s plan to suspend revenue sharing for two years.
Katz plans to amend his bill to reinstate funding to a program that was designed to encourage communities to share and consolidate services. The amendment appears designed to appease LePage and his Republican allies, who have argued that cities and towns should do more to consolidate services and collaborate with their neighbors.
The Fund for the Efficient Delivery of Local and Regional Services was enacted in 2004 by Democratic Gov. John Baldacci. It awarded several grants, including nearly $500,000 to Lewiston and Auburn, for a high-profile consolidation effort that ultimately sputtered in 2006.
The program hasn’t received any funding since 2011, but the governing statute remains.
Katz said reviving the fund would create an incentive for collaboration rather than a penalty or a state mandate.
“As a Republican, I’ve always felt the best decisions are made locally,” he said. “The further you get away from local government, the more inefficient it becomes. I think revenue-sharing is a good, solid Republican principle.”
Geoff Herman, of the Maine Municipal Association, said some cities and towns may have concerns that the ramp-up provision in Katz’s bill would become like the state mandate to fund 55 percent of local education costs — a mandate the state has never met.
However, Herman said, any proposal that “recognizes the importance of this program and seeks to restore and maintain it as it was designed is positive.”
A public hearing on Katz’s bill has not been scheduled.
Steve Mistler — 620-7016