GOP budget trick hikes property taxes, cuts education to fund tax break for the wealthy

GOP budget trick hikes property taxes, cuts education to fund tax break for the wealthy

Maine voters asked legislators to tax the wealthiest 2% of Maine households to fully fund education in the state. Now, Republican lawmakers are trying to weaken our commitment to local schools so they can overturn the will of Maine voters, give tax cuts to the wealthiest families, and shortchange Maine schools.

Because of the legislature’s failure to pay state retirement obligations in the 1980s and ‘90s, the state is still making large yearly payments to make its retirement system whole by the year 2028. These payments are called the “unfunded actuarial liability” (UAL). Some Republican legislators have proposed the state add these payments to our total education cost.

This is wrong for many reasons. It doesn’t send a penny more to classrooms. It’s an accounting gimmick to make it appear the state is funding its obligation to schools while pushing more costs onto property taxpayers. What’s more, it punishes schools and students for the failure of past legislatures to pay retirement obligations decades ago – that is what created the UAL in the first place.

But the real issue is this – including the UAL also raises property taxes because it increases the total cost of education shared by the state and local communities. In other words, property taxpayers are responsible for 45% of the total cost of education, so increasing the cost of education by the UAL amount of $172 million means property taxpayers will pay for 45% of the cost of the UAL, or $77.4 million. This is nothing more than a cost shift to local property taxpayers so the state can pay less than its fair share of education costs.

Funding the majority of basic education costs from state revenues has been a goal of Maine people for decades. As early as the School Finance Act of 1985, the legislature pledged its “intent…to provide at least 55% of the cost of the total allocation,” meaning “total actual local operating costs and actual local program costs” plus debt service allocations. When the state reformed its method of allocating costs and subsidies, creating the current “Essential Programs and Services” formula, it reiterated this goal. In 2004, Maine voters affirmed their support in a statewide ballot. Despite this widespread support from lawmakers and voters, the goal of funding 55% has never been met. The explanation from successive legislatures has been a lack of revenue. Last year, the voters solved that problem by approving the high income surcharge, which is expected to raise enough to make up all or most of the additional cost of meeting the 55% goal.

Accounting tricks might allow Republicans to claim, with a straight face, that the state is funding 55% of education costs, but it shifts 45% of the cost of teacher retirement onto property taxpayers and fundamentally shortchanges Maine’s students.

Senate President Michael Thibodeau, official photo.

About author

Sarah Austin
Sarah Austin 5 posts

Sarah is a policy analyst for the Maine Center for Economic Policy. She holds a master’s of public affairs from the University of Wisconsin-Madison’s La Follette School of Public Affairs and a bachelor’s of science in environmental policy from Maine’s Unity College. Prior to MECEP, she worked at the State Innovation Exchange at the Center on Wisconsin Strategy and on issue campaigns in Maine and across the country on issues ranging from tax reform to non-discrimination.

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