Forecaster Forum: When you're in a hole, there's no easy way out
The recently approved budget for the town of Falmouth ($10 million) and its schools ($25 million) will amount to approximately $35 million for the coming year. That means there will be no increase in this coming year's tax rate ($12.35 per $1,000 of valuation) if Falmouth residents vote to validate the school budget on June 9.
Keeping the tax rate flat is a feat that is unlikely to happen again without some very hard choices.
Why? In a statewide referendum, the voters approved having the state assume responsibility for 55 percent of education funding. The intent of the measure was to lighten the load on local property taxpayers while shifting those education costs to the state. That was before the economy and tax revenues plunged.
For the coming budget year, the state, thus far, has cut $1.1 million from Falmouth's education reimbursement. But it used the recently passed federal stimulus bill to soften the blow to Falmouth by adding back a one-time amount of $790,000, leaving a hole in the school budget of $290,000. The School Board and administration closed the gap rather than requesting a tax increase. However, without the federal stimulus money, the school budget hole for the following year (2010-2011) could be at least $1.1 million or worse.
This November, voters also will decide if they wish to cut the amount they pay in vehicle excise taxes. If passed, the town of Falmouth would experience a loss of another $600,000 to $800,000 that currently helps to fund the town's municipal services. In short, the prospect of a combined $2 million hole in the budget will need to be filled by cuts and/or higher property taxes.
For argument's sake, if Falmouth were to totally cut funding for curbside trash and recycling collection ($360,000), the library ($374,000), open space ($280,000), athletics ($575,000) and METRO/RTP bus service ($171,000), it would amount to $1.8 million. Teachers' union contracts also are up for negotiation. Would those cuts be acceptable and preferred over an increase in real estate taxes of 10 percent (about a $535 increase for the average home in Falmouth)? That amount assumes all other costs remain the same – no spike in fuel costs, no salary or benefit changes, no inflation.
The Town Council's recent hour-long public hearing and debate on closing the Pleasant Hill Fire Station was sprinkled with comments about the modest amount of money ( about $30,000) it takes to maintain the station. In light of next year's challenges, it is time to put such discussions in perspective and prepare for far more serious choices that will impact household incomes, education and town services.
All these local considerations need to be set against other costs for Maine families. Maine's top rate for personal income, capital gains and s-corporation taxes (8.5 percent) is the fifth highest in the nation. Anyone earning more than $20,000 pays the highest rate. An effort to lower income taxes and raise sales taxes is currently being debated in Augusta.
In addition, the cost of health care in Maine is the second highest in the nation, according to the Kaiser Family Foundation.
Finally, with mounting federal spending, federal taxes will go up and not by a little.
What's the solution? You need to respectfully let your elected officials know what you want and expect. If you are not satisfied with their actions (as opposed to their rhetoric), you need to elect people you hope will do a better job. You may also choose to run for office. But please remember, there are no easy answers.