Maine Taxpayer Bill of Rights, Question 1 (2006)
If Question 1 had been approved, it would have limited increases in state and local government spending in Maine to the rate of inflation plus population growth. Any tax and fee increases would have required voter approval.
Text of measure
The question on the ballot was:
- "Do you want to limit increases in state and local government spending to the rate of inflation plus population growth and to require voter approval for all tax and fee increases?"
The official ballot summary said:
| The bill proposes to restrain the growth in state and local government by imposing expenditure limitations on state and local government and by requiring a procedure of voter approval of tax and fee increases.
Under this bill, growth in annual expenditures of the General Fund, the Highway Fund, quasi-governmental organizations, Other Special Revenue funds and local district governments are limited according to increases in population and inflation. Growth in budgets of school administrative units and state-level educational institutions is limited according to increases in inflation and student enrollment. For the General Fund and Highway Fund budgets, revenues exceeding the expenditure limitation must be distributed by directing 20% of that excess to a budget stabilization fund and 80% of that excess to a tax relief fund. The budget stabilization funds may be used only in years when revenues are not sufficient to fund the level of expenditure permitted by the growth limits. The tax relief funds must be used to provide tax relief through refunds proportional to individual income tax personal exemptions claimed in the previous tax year or a decrease in motor fuels taxes. For quasi-governmental agencies and state agencies that manage Other Special Revenue funds, the managers of those funds must report excess surpluses to the Legislature with a plan for refund of those revenues.
Under this bill, an increase in revenue would be possible only by a 2/3 vote of each House of the Legislature or the legislative body of a local district or the governing body of a quasi-governmental agency and the approval of the voters of the jurisdiction, if applicable.
"Intent and Content"
The "Intent and Content" statement prepared by the Attorney General of Maine said:
| Intent and Content Prepared by the Office of the Attorney General
This citizen-initiated legislation would establish revenue and expenditure limits for state and local government. It also specifies conditions under which those limits could be exceeded.
State government: At the state level, any increase in revenue would require the approval of 2/3 of the members of each body of the Legislature, as well as the approval of a majority of the voters at a statewide election. Voter approval would not be required, however, if annual state revenue were less than the sum of payments on general obligation bonds, required payments related to pensions and final court judgments. An increase in revenue is defined to include legislation that causes a net gain in revenue and enacts any new tax or new fee, increases or expands the base of an existing tax or fee, extends an expiring tax or fee increase, repeals any tax exemption, credit or refund, or reduces benefits or eligibility under the Business Equipment Tax Refund program. An emergency tax could take effect after enactment by a 2/3 vote of each body of the Legislature, but it would remain in effect only if approved by a majority of the voters at the next statewide election. If disapproved by the voters, the tax would expire 30 days after the election. Revenues from an emergency tax could be spent only after available reserves were depleted, and would have to be refunded 180 days after the emergency ended if not spent on the emergency. Emergency, for these purposes, does not include economic conditions or revenue shortfalls.
Expenditures from the General Fund, the Highway Fund, and Other Special Revenue funds would be limited to the “maximum annual percentage change in state fiscal year spending” in each of these fund categories, plus any revenue increases that were approved by 2/3 of each body of the Legislature and by a majority of the voters in the manner described above. The “maximum annual percentage change in state fiscal year spending” equals the increase in the Consumer Price Index for the most recently available calendar year plus the increase or decrease in the population of the state for the preceding calendar year over the prior calendar year. These spending limits may be exceeded only if approved by the Legislature and the voters in the same manner as for an increase in revenue.
If there is an unappropriated surplus in the state General Fund at the close of the fiscal year, 80% of it would be transferred to a newly created Tax Relief Reserve Fund. In the event the amount in the Tax Relief Reserve Fund reached a level exceeding $25,000,000, the Legislature would be directed to enact legislation to provide for a refund to taxpayers of amounts in the Fund. If the Legislature failed to do so, the State Tax Assessor would be required to calculate a one-time personal exemption refund to distribute the funds.
Similarly, 80% of any unallocated surplus in the Highway Fund would be transferred to a new Highway Fund Reserve Fund. If the amount in that reserve fund exceeded 10% of Highway Fund expenditures in the previous fiscal year, the State Tax Assessor would be directed to calculate a proportional reduction in motor fuel taxes for the following calendar year.
The remaining 20% of any unappropriated General Fund surplus would be transferred to the Maine Budget Stabilization Fund, while the remaining 20% of the unallocated surplus in the Highway Fund would go into a Maine Highway Budget Stabilization Fund. Monies held in these two stabilization funds could be used to finance expenditures up to the spending limits applicable to the General Fund and Highway Fund, respectively, when revenues in those funds are insufficient.
Each quasi-governmental agency or state agency that manages an Other Special Revenue funds account would be required to submit an annual report to the Legislature identifying revenues that exceeded the spending limit, together with any uncommitted revenues received during the previous fiscal year, and to propose a plan for refunding the amount that exceeded 10% of the previous fiscal year’s expenditure. Quasi-governmental agencies affected by this legislation include: the Child Development Services System, the Finance Authority of Maine, the Governor Baxter School for the Deaf, the Loring Development Authority, the Maine Community College System, the Maine Educational Loan Authority, Maine Maritime Academy, the Maine Port Authority, the Maine Municipal Bond Bank, the Maine State Housing Authority, the Northern New England Passenger Rail Authority, the University of Maine System, the Maine State Retirement System, the Maine Health and Higher Educational Facilities Authority and the Maine Governmental Facilities Authority.
Local government: A local ordinance or tax levy that increases revenue (using the same definition of increase in revenue as described above for state government) may not be enacted by a county, municipality, school administrative unit, or other governmental unit with authority to collect revenues unless it is approved by 2/3 of the members of the legislative body of that local governmental entity as well as by a majority of the voters at a local election in that jurisdiction. Voter approval is not required if annual revenue is less than the sum of payments on general obligation bonds, required payments related to pensions, and final court judgments, or if the local governmental unit does not have a body of voters. The provisions for enacting emergency taxes are the same as at the state level, except that approval by a majority of the voters refers to voters within the relevant local district. Emergency is defined to exclude economic conditions, revenue shortfalls and increases in district salary or fringe benefits.
This initiative would limit local government spending to the “maximum annual percentage change in fiscal year spending.” For local school districts, that is calculated to be the Consumer Price Index for the most recently available year, plus any increase or decrease in student enrollment, plus any increases in revenue approved by 2/3 of the district’s legislative body and by a majority of the voters in the manner described above.
For local governmental units other than school districts, the “maximum annual percentage increase in fiscal year spending” is defined as the amount of revenue for the local district for the previous fiscal year, adjusted by either the change in assessed value of taxable real and personal property in the local district or by the Consumer Price Index for the most recently available year plus any increase or decrease in population for the preceding calendar year over the prior calendar year, whichever produces the lower number, plus any increases in revenue approved by 2/3 of the local unit’s legislative body and by a majority of the voters in the manner described above.
Exceeding these spending limits would require approval by the local legislative body and the voters in the same manner as for an increase in revenue.
If a local district received revenues in a fiscal year in excess of this spending limit, the local district would be allowed to set aside in a reserve account for unanticipated contingencies an amount up to 10% of the previous fiscal year’s expenditures and would be required to use the remainder of that excess to reduce the amount of property tax assessed in the succeeding year.
The initiative requires election officials to mail notices containing certain specified information to all active registered voters in advance of any statewide or local election to consider exceeding applicable spending limits or approving an increase in revenue. It also requires the state to reimburse municipalities for certain costs associated with those elections.
Fiscal impact statement
The fiscal impact statement prepared by the Office of Fiscal and Program Review said:
| If approved by the voters in November of 2006, it is assumed that this measure would take effect and apply to State fiscal year 2007-08.
Using current estimates of inflation and population change, the State spending limit is estimated to allow growth of approximately 3.4% from the prior fiscal year’s expenditures in both fiscal year 2007-08 and fiscal year 2008-09. Based on the assumption that the spending limit will use fiscal year 2006-07 spending, which is assumed to equal appropriations and allocations, the General Fund spending limit is projected to be below projections of General Fund revenue. For the Highway Fund, the spending limit based on current projections and fiscal year 2006-07 allocations would be above projections of Highway Fund revenue in each year of the 2008-09 biennium. The actual spending limitations for fiscal year 2007-08 will not be established until final expenditures for each of the funds are determined after the close of fiscal year 2006-07.
Based on the projected growth under current law of some of the General Fund major programs including General Purpose Aid for Local Schools, Teacher’s Retirement and Medicaid/Maine Care, the 123rd Legislature will need to reduce funding from current projections and implement the statutory program changes necessary to adjust funding needs to stay within the spending limits.
This initiative has the effect of suspending the annual indexing of certain fuel taxes. The total revenue loss is estimated to be $7,130,000 in fiscal year 2007-08 and $14,260,000 in fiscal year 2008-09. The impact by fund is expressed in the table below.
This initiative amends the year-end transfers from the unappropriated surplus of the General Fund. It repeals the transfers to the State Contingent Account of up to $350,000 and the Loan Insurance Reserve within the Finance Authority of Maine of up to $1,000,000. It also repeals transfers to the Retirement Allowance Fund within the Maine State Retirement System and the Reserve for General Fund Operating Capital. For the General Fund and the Highway Fund, it requires at the close of each fiscal year that 80% of any state surplus must be transferred to a fund for the exclusive purpose of tax relief, and the remaining 20% must go to General Fund and Highway Fund Budget Stabilization Funds and only be used if revenues are not sufficient to fund the level of expenditure permitted by the spending limits.
This initiative requires a 2/3 vote of legislative bodies for all tax and fee increases followed by a majority approval by voters in a referendum election. The cost of preparing ballots and conducting a statewide referendum election on any tax or fee increase is estimated to be $139,560 per election. Each such election would also require the expenditure of approximately $824,547 to mail out required notices to each active registered voter in the state. The State would also be required to reimburse municipalities for the cost of administering any statewide referendum election on a state tax increase, as well as for the cost of one local election per district that occurs during a regular election. Local election costs will depend on the size of the district involved and could range from $150 to $41,000. There would be additional costs ranging from $19 to $48,562 associated with mailing notices to active registered voters for each local election as well.
The impact of this measure on the amount of funding available to individual school administrative units to support the cost of providing education cannot be determined at this time. It is also not clear how the required approval of the legislative body and the voters in a jurisdiction, in order to raise additional revenue or exceed the expenditure limitation, will affect a local unit’s ability to meet its required local share of funding K-12 education. Current law requires that, if a local school administrative unit does not raise its required local share, its State subsidy will be proportionately reduced.
Donors to the campaign for the measure:
- Taxpayerbillofrights.com: $497,621
- Citizens Alliance of Maine: $4,040
- Mainers for Tax Relief: $1,455
- Total: $503,115
Donors to the campaign against the measure:
- Citizens United to Protect Our Public Safety Schools & Communities: $1,361,235
- Citizens Who Support Maines Public Schools: $718,684
- Total: $2,079,919
Overall Total: $2,583,034
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