SCARBOROUGH – The Scarborough Town Council has put its chips on the table, betting its budget against Gov. Paul LePage and his design to balance the state’s biennial spending plan, now winding its way through legislative review.
On May 1, the council voted 6-1 to adopt a $70.94 million budget for the next fiscal year, to start July 1. Of that, $54.3 million will come from taxation, a $4.2 million increase based largely on 3 percent growth in spending on top of an anticipated $1.3 million decline in revenues and a $1.8 million cut in the state subsidy for education. Combined, that will drive property tax bills up 7.9 percent.
Based on the adopted budget, and assuming the final tax commitment shows a $15 million increase in property valuation townwide, Scarborough’s tax rate is set to climb $1.09 to $14.89 per $1,000 of valuation. In other words, the median single-family home, assessed at $300,000, can look forward to a $327 tax hike, and a new median property tax bill of $4,467.
However, if the council has misjudged the popularity of some aspects in LePage’s budget proposal, town coffers could wind up short an additional $1.6 million – from a $1.1 million loss in revenue sharing, which would have come as Scarborough’s share of state sales taxes, and a $517,000 obligation to fund teacher pensions – forcing draconian cuts, a dip into undesignated reserves, or a round of supplemental taxation.
Only Councilor Ed Blaise voted against the new spending plan. Setting aside possible future ramifications of the state budget on local wallets, Blaise said the near-8 percent hit to local taxpayers is “totally outrageous” all by itself.
Following the first reading of the budget on April 11, $82,287 was cut from the municipal proposal and $328,968 from school side, which by that time already had been cut $1.7 million from the original plan of Superintendent George Entwistle, which called for a “needs-based,” 10.6 percent hike in spending. On final reading the council cut an additional $44,290 by agreeing to delay the hiring of four new firefighters until Jan. 1, 2014. It also docked the school budget $623,500, largely on the belief that a 9-4 vote of the Legislature’s education committee April 20 signals the imminent death of LePage’s plan to shift half the cost of funding teacher pensions to individual school districts.
Still, Baise said that was not enough.
“In the last four years, our taxes have gone up 22.6 percent,” he said. “How many people can afford to live in this town at that rate of growth?”
“My personal house taxes have gone up 100 percent since I moved here in 2001,” said Councilor James Benedict. “There may be a point in time when I might not be able to afford to live here. I moved here from Massachusetts to escape the very same thing that’s going on here now — wages going up not anywhere near the cost of living.”
“I don’t know where people are going to move to, they’re not going to get a deal anywhere else,” said Councilor Judy Roy, pointing out that Scarborough’s projected property tax rate is expected to remain the second or third lowest in Cumberland County.
The day after the final council vote on the budget, the school board amended its regular May 2 agenda to assimilate the $623,500 hit to the bottom line. That brought the budget that will go to voters at the school validation vote on Tuesday, May 14, down to $40.24 million – still a 4.01 increase from current spending.
Most of that cut – $524,189 – is predicated on the assumption that the state will not follow through on LePage’s idea to shift teacher retirement costs. Although the council concerns itself only with the bottom line, steering clear of line items in the school budget, Roy said the council’s $623,500 cut was made with the retirement obligation in mind.
“It’s a little risky, but I’m hearing good vibes form the state,” said Roy, referring to committee votes against the retirement shift. “The Legislature will need a two-thirds majority in order not to be vetoed by the governor, but I’m willing to take that risk.”
Assuming the retirement obligation is excised from the state budget, cutting the line item from the school budget would essentially be “a wash,” said Roy.
However, it doesn’t quite work that way.
For the 2013-2014 fiscal year, the state is on the hook for $201.4 million in retirement costs to teachers and other eligible school employees. Of that, $28.9 million is paid into the pool for future payouts to current teachers based on 2.65 percent of salaries. That money, currently billed to the state, would instead be paid by local school units. However, the plan also included filtering subsidies totaling $14.5 million through general purpose aid allocations for schools.
According to Jim Rier, the deputy commissioner of education, if the Legislature does remove the retirement obligation, it also automatically cuts the retirement subsidy. Once that happens, general purpose aid will have to be recalculated across the board. That annual contribution from the state to local education costs is divvied up based largely on property values. And, just as happened with the $1.8 million Scarborough lost in state school aid this year, because its home values have remained fairly stable compared to larger losses across the state, the town will lose once more in the recalculation.
“If this policy proposal goes away and the state pays 100 percent of those retirement costs going forward, just like they have been, the impact on Scarborough of that happening is going to be a reduction in state subsidy of about $143,000 from where they are now,” said Rier.
Entwistle said Thursday that, because it may not be until mid-June before the Legislature adopts a budget, it will be too late to pull that $143,000 from the local budget, which voters will already have weighed in on anyway. For that reason, he said, he will treat the cut, if it comes, as a curtailment to next year’s budget, picking and choosing from among various line items to find savings as the year winds on.
He will have a similar task with the remaining $99,311 in cuts ordered by the council. The school board voted unanimously to take that money from “regular instruction” line items to be decided at a later date.
“The specifics of this reduction will be determined by the superintendent and the school board finance committee,” said finance committee Chairman Chris Caiazzo, when making the motion.
“I will inform the full board of any decisions made in the finance committee,” he said.
The town is also dealing with uncertainty on the municipal side of the budget. Among LePage’s recommendations for balancing the state budget were adjustments to homestead exemptions for property taxes and a shift in excise taxes, as well as the elimination of revenue sharing.
Included in Scarborough’s adopted $28.17 million municipal budget is a $170,000 loss in revenue from an anticipated shift of excise taxes on commercial vehicles from town coffers to the state. Because just 10 of Maine’s 491 organized municipalities account for about half of those fees, Town Manager Tom Hall said when crafting his budget that Scarborough is on the wrong side of the numbers game.
“This one, just because there’s so few of us affected, stands a better chance of getting through the legislative process.”
However, because state revenue sharing affects all communities, Hall said he expects that measure to get pulled by the time the state’s biennial budget is adopted.
If that does not happen, Scarborough councilors would have to scramble to make up for a $1.12 million loss.
Roy seemed reluctant to swing the ax, even though it fell on her, as chairwoman of the town finance committee, to make the motion. Even with a last-minute reprieve of $24,532 to $43,568 her committee cut from the library during budget deliberations, it was a terrible duty to perform, she said.
“As I drove here tonight, I thought I was driving to a funeral, that’s how tough this budget was,” said Roy.