121st Maine Legislature
		Office of Fiscal and Program Review
		LD 1141
		An Act to Provide Property Tax Relief for Maine Residents and Businesses and Implement Comprehensive Tax Reform
		LR 0392(04)
		Fiscal Note for Bill as Amended by Committee Amendment " "
		Committee: Taxation
		Fiscal Note Required: Yes
		Minority Report
Fiscal Note
					Projections	Projections
			2003-04	2004-05	2005-06	2006-07
Net Cost (Savings)
	General Fund		$0	$   5,755,517	$ 89,001,988	$ 149,880,942
Appropriations/Allocations
	General Fund		$0	$   5,755,517	$ 89,001,988	$ 149,880,942
	Other Special Revenue Funds		$0	$            500	$            500	$             500
Fiscal Detail and Notes
	General Fund Summary		2003-04	2004-05	2005-06	2006-07
	Additional approp needed to fund EPS in bill		$              -	$              -	$ 82,173,651	$ 115,881,956
	Maine Revenue Services		$              -	$   5,755,517	$   6,828,337	$  33,998,986
	Net General Fund Cost (Savings)		$              -	$   5,755,517	$ 89,001,988	$ 149,880,942
	This bill includes the Essential Programs and Services model approved in Public Law 2003, c. 504, as the basis for determining the total cost of K-12 public education.  However, this bill differs from PL 2003, c. 504 in that it requires the State to fund 48% of the 100% of the total state and local operating cost allocation based on essential programs and services in fiscal year 2005-06 with the State's share increasing to 55% of the full cost by fiscal year 2007-08 versus the 50% currently required.  This bill also provides for the calculation of a full-value education mill rate that is required to raise the total maximum local share of the cost of funding K-12 education and requires that this rate decline over the 2005 through 2007 property tax years.  The Department of Education estimates the mill rate expectation to be 9.98 mills in fiscal year 2005-06.
	This bill also provides for a transition adjustment through fiscal year 2007-08 for municipalities that experience an adverse fiscal impact as a result of the phase-in of the essential programs and services model and the maximum local share mill rate expectation method of determining the local contribution of funding K-12 education.  This bill proposes a transition adjustment amount of $10,000,000 in fiscal year 2005-06 with the amount declining in each successive year through fiscal year 2007-08.  Since this legislation does not specify the transition amounts for fiscal year 2006-07 and fiscal year 2007-08, this fiscal note assumes that the transition adjustment declines evenly over the 3-year period.  This fiscal note also assumes that the transition adjustment amounts are included in the estimated General Fund appropriation amounts needed to fund K-12 education based on the Essential Programs and Services model in this measure, thereby affecting the distribution among individual school units.  The impact to each local school unit can not be determined at this time.
	This bill establishes an Education Funding Stabilization Fund as a nonlapsing fund within the Department of Administrative and Financial Services to be used to meet the State's share of the cost of funding K-12 public education.  This legislation requires the Fund to receive 16% of the unappropriated surplus of the General Fund  in each fiscal year beginning in fiscal year 2004-05.  The amount of funds to be transferred to the Education Funding Stabilization Fund in each fiscal year can not be determined at this time and will depend on the amount that actual General Fund revenues exceed projected levels in each fiscal year.  This bill includes a $500 Other Special Revenue Funds allocation in fiscal year 2004-05 to establish a base allocation for the fund.
	The following table provides estimates for the total State and Local Operating Cost of funding education based on the Essential Programs and Services model and provides a comparison of the General Fund appropriations that are estimated to be needed to fund the state's share of the cost of funding K-12 education based on the State's contribution reaching 50% in fiscal year 2009-10, as approved in Public Law 2003, c. 504, versus the 55% State contribution by fiscal year 2007-08 proposed in this legislation.
			State and Local Cost to Fund K-12 Public Education
			Utilizing the Essential Programs and Services Model
			Comparison of 50% State Contribution vs. 55% by FY 2007-08
			Base Year		Projections	Projections
			2003-04*	2004-05*	2005-06	2006-07
	Total State & Local Operating Cost allocation based on EPS model (100%)		1,256,951,694	1,260,260,954	1,270,125,664	1,285,714,652
	EPS Transition Percentage		80.82%	82.00%	84.00%	88.00%
	Adjusted Total Operating Allocation based on EPS model approved in P.L. 2003, c. 504		1,015,819,375	1,033,413,982	1,066,905,558	1,131,428,894
	Total State & Local cost based on EPS funding model (100%) (includes program costs, debt service and adjustments) based on LD 1141		1,708,540,751	1,745,020,078	1,740,420,076	1,773,165,347
	Total State & Local cost based on EPS funding model approved in P.L. 2003, c. 504 (includes program costs, debt service and adjustments)		1,467,408,432	1,518,173,106	1,537,199,970	1,618,879,589
	State Share Targets to fund K-12 education based on EPS model approved in P.L. 2003, c. 504		49.89%	47.81%	49.00%	49.25%
	State Share Targets to fund K-12 education based on EPS model in LD 1141		49.89%	47.81%	48.00%	51.50%
	Estimated General Fund appropriation needed to fund K-12 education based on EPS model approved in P.L. 2003, c. 504				753,227,985	797,298,197
	Estimated General Fund appropriation needed to fund K-12 education based on LD 1141				835,401,636	913,180,154
	Additional General Fund Appropriation required to fund EPS model in LD 1141 vs. P.L. 2003, c. 504				82,173,651	115,881,956
	* No adjustment in fiscal year 2003-04 and fiscal year 2004-05
	This bill increases the Maine Residents Property Tax Reimbursement program and phases out the homestead exemption over time.  The net increase in the General Fund cost due to these changes is estimated to be $5,760,000 in fiscal year 2004-05.  It also requires certain changes to the income tax structure and the sales tax rate or sales tax base.  The impact of those provisions can not be estimated at this time.  The state will also have to reimburse municipalities for 50% of the revenue loss due to the personal property tax exemption beginning in fiscal year 2006-07.  Maine Revenue Services will also begin to experience business equipment tax reimbursement (BETR) program savings in the same fiscal year.  The net General Fund cost of those two changes is estimated to be $27,000,000 in fiscal year 2006-07.  The state will also be required to reimburse 90% of the local costs attributable to the change in the homestead exemption.  These costs, and other related administrative costs, are expected to be in excess of $150,000 per year in fiscal year 2005-06 and 2006-07.