Friday, August 14, 2009

Property Taxes: 60% Higher????

As we are fire-hosed with all the "jibber-jabber" about health care reform, my attention strayed to the fiscal illusions and game playing that underlie the health care house of cards as it currently exists. The business model and the equations that should apply have become so distorted and artificial as to make understanding futile and rational and intelligent recommendations impossible.

It's as if a law was passed that said when it comes to the government paying its bills, 2 + 2 = 3, and all the rest of us stand around arguing whether 2 +2 is really 5 or really 6. And then I recalled writing about the delusions of revenue sharing last month.

We all know that the Maine State Government is in economic meltdown. The recent budget was only balanced by making substantial cuts and then applying hundreds of millions in one time money. Since then, revenue figures have been coming in well below projections made, foretelling an even greater crisis ahead, and without the benefit of one time cash infusions.

One way of looking at state expenditures is in terms of spending on actual state programs, and funds transferred to local governments for their programs. The first type funds things like the various health and human services programs, where the second type helps municipal government pay for their programs.

Think of the latter as "discretionary." In your personal finances, you have to pay for the basic costs of living: housing, food, utilities, cars, etc. And then, if you have children, you may give them an allowance to pay for things they like to do. When things get tight, you still have to pay the bills, but you have no real obligation to pay allowance, or for that matter, to go to the movies or out to dinner.

Revenue sharing is like that; it does not pay state bills, but instead, it sends an "allowance" to the towns. As such, when the State gets squeezed, as it is now, and is about to be even worse, legislators will look to cutting our allowance as an easy way to reduce expenses. Local officials will bear the brunt of public outrage because of steep increases in property taxes.

We're already seeing the first warning shots on exactly this phenomenon. An article today includes these words:
Rep. Peggy Rotundo, D-Lewiston, who also serves on the budget-writing committee, said the eventual cuts would affect many Mainers.

"As the state cuts back, those needs that people have remain," she said. "Sometimes you end up cost-shifting back to the local government with the state cuts."

This seems like a good time to examine the effect of revenue sharing on our property taxes in Brunswick. I'll use round numbers in what follows.

The town budget for the 09/10 fiscal year is about $54.3 million. Property taxes pay for about $29.3 million of that amount.

There are a variety of other revenue sources that make up the difference. The key amounts in "intergovernmental transfers" are about $14 million from the state for General Purpose Aid to education; $2 million from the state in revenue sharing; and another $1 million or so from the Feds. We are also expecting $1 million plus annually from the state to reimburse us for the debt payments on the new elementary school.

Given the condition of Federal and State budgets, it's fair to say that these amounts are, in essence, borrowed, and that they are at great risk.

Were these amounts to disappear, property taxes would have to pay for about $48 million in town expenses, or a 60% increase. What does this mean?

Well, if you currently pay $2,000 a year in property taxes, you can figure another $100 a month to cover the increase. If you pay $4,000 a year now, you'll be paying $6,400, or $200 a month more. If you now pay $6,000, you'll be staring at a nearly $10,000 tax bill, and you'll need another $300 a month to give the town.

None of these figures account for future budget increases (virtually guaranteed) and future revenue decreases (virtually guaranteed as well) which will only make matters worse. The truth is that you are already paying these larger sums, but just not from the same pocket as you pay your property taxes.

Instead, you're paying the difference to the State and the Feds, and it's going in to their "free money" accounts. In the popular understanding, that process causes the money to lose its identity as having come from you, and instead it becomes a handy-dandy prop for use by our elected officials to demonstrate how much they care for us.

A neat trick that. And for those who appreciate such gestures, please feel free to send me a check for $100 or more, and chalk it up to "paying your fair share." Once I cash your check, I'll send you 75% of the amount as fiscal stimulus.

Once the program gets rolling, I'll write a post about how good it made me feel to "give something back" to the community. If enough of you do as I suggest, I might even get some sort of civic award.

No comments:

Post a Comment