- Associated Press - Wednesday, January 22, 2014

AUGUSTA, Maine (AP) - Further reductions in state aid to Maine cities and towns will result in cuts to essential services and skyrocketing property taxes, municipal officials told lawmakers on Wednesday.

But Republican Gov. Paul LePage’s administration and business owners say the plan to pay for revenue sharing by cutting some tax incentive programs or dipping into the state’s savings fund will hurt companies that are still struggling from the recession.

Mayors, city council members and town managers are urging lawmakers to approve a measure that would prevent the reduction of $40 million in municipal aid next year - which is supposed to happen if lawmakers fail to agree on which tax breaks or cuts should be eliminated to find savings in the tax code.

Maine’s municipalities typically received 5 percent of all state sales and income tax revenue, which would have been $138 million this year, according to the Maine Municipal Association. But significant reductions over the last several years mean that only $20 million will be left next year if these cuts go through, the association said.

Mike Chasse, a city councilor for Presque Isle, told the Appropriations Committee on Wednesday that his city’s budget is already in a “crisis situation.” Since 2008, state aid has been reduced by $1.3 million, or roughly 12 percent of the city’s budget, he said. If $40 million in revenue sharing is cut, the city would lose another $477,000, he said.

The city has had to eliminate full-time employees, shut down its outdoor pool and cut back on police and firefighters, he told the committee.

“We’re at the point of where we really cannot cut anymore without losing significantly from our community,” he said

But LePage’s administration and groups like the Maine State Chamber of Commerce said Wednesday that the proposal would hurt businesses at a time when they need help the most.

Under the measure, the $40 million in state aid would be paid for by things like putting a 12-year cap on a program that provides tax reimbursements for businesses, eliminating the program for some retail stores and dipping into the state’s budget stabilization, or rainy day, fund.

Many manufacturers, like paper companies, are still trying to get back on their feet after the recession, said Michael Allen, associate commissioner for Tax Policy for Maine Revenue Services. A change in the tax reimbursement program “of this magnitude at this time would be damaging to the bottom line of these companies,” he said.

Meanwhile, taking money out of the rainy day fund, currently at about $60 million, will hurt the state’s bond credit ratings, Sawin Millett, commissioner of the Department of Financial and Administrative Services told the committee.

Republican Rep. Tom Winsor of Norway said local and state government needs have to be balanced with those of private sector workers and businesses.

“We heard lots of testimony from town managers trying to protect their budgets, but the people I’m most concerned about are the ones who are hard at work right now in a mill or a food processing plant,” he said in a statement. “Without a strong economy, we’re not going to have sufficient budgets to argue about.”


Follow Alanna Durkin on Twitter at https://www.twitter.com/aedurkin



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