Last fall, it looked like Maine schools were poised to get a pretty significant increase in state aid.

Even though the Legislature killed a voter-approved tax surcharge for education, a last-minute state budget deal added an extra $162 million toward schools to ease the sting.

Yet when state allocations were announced this spring, many districts were surprised they were getting far less than expected – triggering tense and sometimes outright hostile budget showdowns with town officials as the schools were forced to ask for more money locally.

Now those budgets, many with deeper-than-expected cuts to school programs, head to voters June 12.

Tensions over the financial squeeze have come to a head in several municipalities in recent weeks.

In Portland, the original superintendent’s budget proposal would have increased the school portion of the tax rate by 9 percent, prompting a swift backlash from several city councilors, including the city’s finance committee chairman. In a series of meetings to winnow it down to an eventual 5 percent increase, tempers flared and a clear rift emerged between people supporting the full budget and those supporting cuts.

In Cumberland, after learning the district wanted additional funds, the Town Council took the unusual stepof releasing a letter to the community blaming the School Board for any tax increase. “It was said (by town officials) that this board before you, that we should be ashamed of ourselves because of this budget. That if you can’t feed your family, it’s our fault. I reject this,” School Board Chairwoman Gigi Sanchez said at a recent meeting, defending the budget that increased 3.8 percent and would raise the school portion of the tax rate 4.4 percent. “I think 3.8 percent is absolutely responsible.”

In Gorham, the superintendent of schools called the unexpected loss of state funding a “gut punch.” Combined with new costs tied to increasing enrollment, taxpayers are facing a double-digit increase in the property tax rate.

And in Scarborough, already reeling from upheaval over a departing principal and the recall of three school board members – and a history of not passing the school budget on the first try – the overall tax rate would increase 1.44 percent.  Signs urging resident to vote no on the budget on June 12 are already up.

LOW TOLERANCE FOR TAX INCREASES

What happened to the state money? Much of it was in the fine print of that legislative budget deal – but that’s a hard thing to explain to angry taxpayers and frustrated city officials.

“You’d think with adding $162 million, it might have had a stronger impact,” said Rep. Phyllis Ginzler, R-Bridgton.

Democrat Richard Farnsworth, Ginzler’s colleague on the Legislature’s Education and Cultural Affairs Committee, agreed.

“I think there were several factors that made it very difficult to stretch the additional $162 million as far as we thought,” said Farnsworth, of Portland.

For many southern Maine communities, the biggest financial impact was the result of the state’s using the last two – not three – years of property valuation to assess a community’s ability to pay for education. That captured more of the recent economic boom – and shaved off a lower valuation year – resulting in more prosperous towns being asked to spend more than expected in local funds for schools.

But just because a town has an increased valuation in the state’s eyes, that doesn’t mean taxpayers have more money in their pockets – or an increased tolerance for tax increases.

Other changes this year include altering the student-teacher ratio and reducing funding for administrative costs.

The budget deal was the latest in a series of decisions that shift state costs to locals under the LePage administration. Many school districts are still struggling to adapt to the 2013 state budget, which shifted certain teacher retirement costs to local districts. That move coincided with the LePage administration suspending municipal revenue sharing for two years before reinstating it at a reduced level.

“It gets a little bit worse every year, that’s the thing,” said Lois Kilby-Chesley, president of the state teachers union.

“There are towns that in the past always passed the budget without a blink, and now they’re questioning the expense. And it’s due to the fact that the state isn’t keeping up,” she said.

FALLING SHORT OF 55% THRESHOLD

Education leaders say the expectation of getting funds from the voter-approved tax surcharge – then losing them in the budget deal – was a significant blow. Under Question 2, a 3 percent surcharge would have been added for annual household incomes over $200,000, with the revenue distributed by the state Department of Education for the sole purpose of meeting the 2004 voter mandate that the state should pay for 55 percent of the cost of K-12 education. The state got closest to that goal in 2009, when it paid for 53 percent of costs. Currently, the state’s contribution is at 47 percent.

Much of the criticism of school budgets is the perception that there is something wrong with the state’s funding formula – or that schools are being wasteful.

It is a perennial issue in Augusta, and there have been multiple studies and work groups analyzing the state’s funding formula and considering changes. Several years ago, a comprehensive $450,000 review of the formula, called the Picus report, found it effective but underfunded. More recently, the governor convened a blue ribbon commission “to reform public education funding and improve student performance.” The panel issued a draft report last year outlining education policy goals but did not suggest specific changes to the funding formula.

In the past, Moody’s Investors Service criticized Maine for failing to meet the 55 percent mandate, saying the state budget puts pressure on municipalities because it increases the burden on local property taxes and leaves cities and towns with tough decisions about how to make up the difference.

SOME DISTRICTS FEEL SHORTCHANGED

To avoid program and staff reductions, many Maine communities have opted to raise property taxes, a 2013 Maine Policy Review paper found, putting more pressure on local taxpayers.

Ginzler said her own district, SAD 61 in the Lakes Region, won’t benefit from most of the changes to the funding formula, and the town must shoulder more of the education costs. That’s because SAD 61, based in Bridgton, is a wealthier district known as a “minimal receiver.” Such districts get as little as 6 or 8 percent of their educational costs covered by the state, while poorer towns – such as a town with closed mills – get more than 80 percent of their costs covered. The formula is set up to provide more state aid to poorer districts, while wealthier districts are expected to pay more toward local education costs.

Ginzler and others argue that the funding formula is working as intended – benefiting towns that are hurting economically, providing more funding for special education students and other changes. But it’s a complex formula with a finite amount of money, which will inevitably leave some districts feeling shortchanged.

Retirement costs have increased since Gov. Paul LePage shifted those costs to local districts. Initially, the statewide annual cost to districts was $29 million, but it went up 25 percent – $9 million – in the next biennial budget. For the 2017-18 biennium, it was expected to increase to $46 million.

“Property owners are being crushed,” Rep. Paul Stearns, R-Guilford, said during a legislative hearing last year on his bill to shift those retirement costs back to the state.

‘THAT’S PROBABLY NOT GOOD’

There was also an effort last year to have the state go back to earlier revenue sharing agreements. Several bills were introduced to require the state to return 5 percent of state tax revenues to municipalities – up from the current 2 percent – as part of the 44-year-old revenue sharing program. The difference represents millions of dollars to many southern Maine municipalities.

Revenue sharing was established in 1972 as a way for the state to help localities pay the costs of mandatory services – such as schools, roads, fire and police departments – since state law prohibits municipalities from levying a local sales tax. The state is supposed to provide 5 percent of sales, income and corporate taxes to municipalities, but lawmakers haven’t hit that level in more than a decade.

Between fiscal years 2009 and 2018, the Legislature transferred about $607 million in would-be revenue sharing dollars to the General Fund. Over the same period, municipal tax assessments increased $625 million, officials said in legislative testimony.

But the fine details of how schools are funded, and the history of how state aid has shifted over the years, are not what people are thinking about when they go into the voting booth.

In Portland, school board members have repeatedly remarked that even though the school budget has never been rejected by voters, it’s not a sure thing this year. In addition to the tensions over the budget numbers, the city will vote on the budget in the primary instead of a special election. Not only will that bring out significantly more voters, but it alters the political makeup of voters depending on what else on the ballot is bringing them to the polls.

Farnsworth, the Portland lawmaker, acknowledged that sometimes the changes in Augusta that were well-intentioned had unexpected negative consequences. Changing the valuation factor in the state funding formula to a two-year average was intended to help districts that went into a sudden economic slump, say from a closing mill.

What he and other lawmakers “did not see” was the flip side of that – healthy economies would see a drop in state aid. In Portland, that one change shifted $1.5 million to local responsibility.

“With that first round – we said oops! That’s probably not good,” Farnsworth said. Lawmakers are now trying to change the valuation cycle back to a three-year average, hopefully in time for next year’s budget cycle, he said.

Noel K. Gallagher can be contacted at 791-6387 or at:

[email protected]

Twitter: noelinmaine

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