Articles By Peter Mills
Controlling Taxes: A Sensible Alternative to TABOR
November 2, 2006
Anger and confusion over taxes in Maine has seldom been higher, fueled by a rapid succession of recent public votes and publicity on the topic:
" Nov 2003: The runoff vote between questions 1A and 1B;
" Jun 2004: The ensuing passage of the MMA referendum (1A);
" Nov 2004: Failure of the Palesky property tax limitation;
" Jan 2005: Passage of LD1 to implement the MMA referendum;
" Oct 2006: The Brookings study on how to restructure Maine;
" Nov 2006: And now TABOR on the upcoming ballot.
Maine people are constantly being told that this referendum or that one will soon bring them relief from high taxes, that the state just needs to adopt one easy solution or another and things will soon be better.
The truth is that it will take years to improve our tax climate. To help us get there we need sensible benchmarks and determined leadership to enforce the limits we set for ourselves over time.
Because of laws passed in 2005 (after TABOR was drafted), there are good limits already in place. What we now need are stronger enforcements. Take one example.
The biggest area of public spending in Maine is K-12 education. Maine spends over $2 billion per year on our 200,000 students. Our cost per pupil is $2000 above the nation's average, yet our teachers are paid about $7000 less than average. This is partly because our class sizes are 23% smaller. We also have many more administrative units than most other states. The fault is partly with the Legislature and partly with municipal voters who reject efficiencies and fail to control local spending.
To bring our costs into line, the state has adopted a system called Essential Programs and Services (EPS) which measures how much each school district is spending in relation to state norms. Some districts are spending as much as 20% or 30% more than what seems reasonable or necessary.
While it is the right of each school unit to spend what its citizens want to spend to educate local children, it is crucial that citizens vote on these extra costs deliberately and with full knowledge of the tax consequences. State law presently requires a conscious vote to override EPS limits, but the process needs to be strengthened, more detail needs to be provided to citizens and a district-wide vote should be required.
State government also needs to control its spending. TABOR would have no legal impact on the Legislature. In 2005, the Legislature adopted benchmarks based on growth in total state income. This is a fair way to measure the capacity of citizens to pay their taxes. To make the benchmarks stick, we need a process that will prevent the Legislature from overriding these limits without a two-thirds vote. While a constitutional amendment is one way to enforce such a requirement, adopting a legislative rule is quicker and a lot easier to get passed. The U.S. Senate has successfully governed itself with a cloture rule that it has honored for decades.
Maine needs a powerful group of responsible civic voices prepared to enforce a long range plan to control government spending, a plan that is stronger than TABOR and better crafted, one that is effective without paralysis, one that improves on familiar laws already in place. That plan was recently created by a group headed by the Maine State Chamber of Commerce and co-endorsed by the Maine Municipal Association, the Maine Education Association and a number of other organizations concerned about Maine's future.
Most legislative candidates in Maine oppose TABOR but are anxious to back an alternative that will set us on the road to necessary change. Many will gladly endorse a plan and commit to its passage if it is promoted by determined citizens who will support the plan regardless of whether TABOR passes or fails.
The alternative would accomplish the following:
1. Avoid TABOR's defects. TABOR won't work without serious amendment. It was drafted before new limits were adopted by the state in 2005. If TABOR is enacted it will conflict with existing limitations that are far better than those that TABOR proposes.
2. Adopt tight controls. The limitations on local governments and schools already in effect are more stringent and more closely tailored to each town than those of TABOR. We should use these limits in preference to those in TABOR, but give them stronger teeth now that local governments have worked with them for two budget cycles.
3. Control spending in preference to taxation. In TABOR, the tax and spending limitations are redundant. It is the spending limit that counts. Therefore, we should preserve the tighter state spending limits that are already in place but drop TABOR's proposed controls over every tax and fee. For towns, counties and school districts, it is senseless to compel annual re-valuations in order to avoid minor increases in mill rates.
4. Adopt either of TABOR's override provisions, but not both. To make limitations on local spending more effective, adopt TABOR's requirement for a public vote but drop the requirement for a 2/3 vote of the legislative body (council, town meeting or school board). Most people agree that a 2/3 vote of the legislative body followed by a public vote is needless. The override process should be tough but not paralytic.
5. Control state spendng by rule. At the state level, however, the two-thirds voting requirement should be applied. Adopt a requirement by legislative rule that state spending limits may not be exceeded without a two-thirds vote. Although not as strong as a constitutional provision, a rule is binding on each legislature that adopts it and is much stronger than what TABOR offers, a mere statute that can be overridden at any time by the majority. Although the legislative rule would have to be renewed by the incoming legislature every two years, the U.S. Senate has adhered to its famous cloture rule for many decades.
6. Control borrowing, which TABOR fails to do. Too often the majority is tempted to balance a budget by borrowing, by selling public assets or by factoring valuable revenue streams like liquor or lottery income. Future benefits are too often promised to public retirees without paying for their accrued costs. In Maine, improvident debt, unfunded retirement benefits and deferred highway maintenance are already our biggest budget woes. TABOR will make them worse. Borrowing is a bigger threat to our state's economic security than is current spending. We should include in a legislative rule a requirement for a two-thirds override vote to pass any budget that fails to pay presently for any deferred obligation.
7. Preserve regionalization incentives. The MMA referendum passed in 2004 directed the state to set aside annually 2% of municipal revenue sharing (about $2.5 million) and 2% of K-12 state school funds (about $18 million) as incentives to regionalize services. These funds should be protected by the proposed legislative rule. Otherwise, they may disappear in order to buy votes during budget negotiations.
If enough responsible citizens reject TABOR and support the Chamber alternative, the state will have a system in place that it can live with over the long haul. Maine has many years of difficult budget decisions ahead. It will be a long road. Anyone who thinks the solution is quick and easy should be viewed with suspicion.