A Brief Guide to Question 4
A Brief Guide to Question 4 (TABOR) on the November 2009 Ballot
What is the wording of Question 4 to go before voters on November 3, 2009?
• “Do you want to change the existing formulas that limit state and local government spending and require voter approval by referendum for spending over those limits and for increases in state taxes?”
What does the bill do?
• Limits growth in annual spending in the General Fund, the Highway Fund and Other Special Revenue Funds to the rate of increase in population and inflation, never less than zero.
• 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.
o 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 Reserve Fund must be used to provide tax relief through broad-based tax rate reductions or refunds proportional to individual income tax personal exemptions claimed in the previous tax year.
• The Highway Fund Reserve Fund must be used to provide a decrease in motor fuel taxes.
• For 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.
• A state tax increase would require a majority vote of each House of the Legislature and majority approval of the voters. Specifically, the bill requires majority approval by the voters for the annual indexing for inflation of motor fuel taxes.
• Likewise, the state expenditure limits contained in the bill may be exceeded by a majority vote of each House of the Legislature and majority approval by the voters.
• The bill adds the requirement of majority approval by the voters before municipal and county expenditure limits may be exceeded.
• The bill requires counties and municipalities to use a cost center budget summary format and make that data public, including posting it to the town’s website as well as the state’s.
What is the philosophy behind the new Taxpayer Bill of Rights (TABOR) initiative?
• The Taxpayer Bill of Rights (TABOR) initiative is based on a simple premise. It allows for the gradual growth of government spending, but it says to policymakers that if they wish to grow government beyond a certain rate of increase, they have to ask voters for permission. It is that simple. The need for TABOR is clearly illustrated by the fact that since the previous referendum vote on the Taxpayer Bill of Rights in 2006, the Legislature has enacted, to date, nearly $300 million in new taxes and fees.
Why is the new TABOR needed?
• Data from the Maine Department of Labor reveals that there are fewer private sector workers today than there were a decade ago. Over the past decade Maine’s private sector has lost 13,000 workers. In stark contrast, Maine’s state and local governments have added 3,400 workers over the last decade in that same timeframe. To put it another way, for every additional state and local government worker added, nearly 4 private sector workers lost their job.
• This public sector job growth has been driven by out-of-control government spending. From FY 2000 to FY 2008, total state expenditures grew $2.1 billion, from $4.7 billion to $6.8 billion, a whopping 46 percent rate of increase. Inflation during this same period increased just 25 percent, half as much.
What has been the effect of this growth of government on Maine’s economy?
• Maine now has the 9th smallest private sector shares of personal income in the country. In 2008, Maine’s private sector share of personal income was only 66.4 percent. In Washington County, the private sector share stood at a dismal 49.5 percent in 2007.
• A robust private sector is the key to prosperity. Maine has only the 33rd highest per capita personal income in the country in 2008. Across the border, New Hampshire has the second largest private sector and has the 9th highest per capita personal income in the country. Clearly, the key to building any kind of sustainable prosperity in this state is better control over the growth of government. TABOR will do that.
Why does the bill place limits on the growth of the Highway Fund and Other Special Revenue Funds, rather than just the state’s General Fund?
Leaving out other special revenue funds would leave a large loophole that state policymakers have, and would continue to exploit. According to the Legislature’s Office of Fiscal of Program Review, between FY 1999 and FY 2008 other special revenue funds grew twice as fast as the general fund—8.6 percent versus 4.1 percent – to $1.27 billion in 2008 from $602 million in 1999. In fact, one reason for the growth in special revenue funds is that LD 1 spending caps only apply to the General Fund. The TABOR provision will end such cynical budget gimmicks at the state level.
The bill puts the annual gas tax increase, which occurs automatically, out to voters. Won’t this, in combination with the Highway Fund cap, hurt the state’s ability to maintain roads and bridges?
Not at all. If there is one thing Maine people have been clear about wanting the state to do, it is maintaining our roads and bridges. Maine voters routinely approve transportation bond issues, even when they oppose other bond issues on the same ballot, because they know how important Maine’s transportation infrastructure is to Maine’s economy. The TABOR initiative would give Maine voters the opportunity to signal to Augusta that they want the care of Maine’s roads to be a top priority.
How are local governments treated under the new TABOR?
Local governments remain under the spending limitations put into place by LD 1, with the one change that spending is capped at average real personal income growth plus forecasted inflation, as opposed to the current formula, which is income growth plus a “property growth factor.” The only other change is that municipalities may only exceed the property tax levy limit by direct referendum vote, as opposed to a written ballot at municipal council meetings or town meetings. The bill contains no changes to the budget approval process currently in place for Maine’s schools.
What is the “cost center budget format” and why is it induced in the bill?
Under current law, Maine’s school districts are required to present their budgets to voters in a “cost center” format, which organizes spending into a handful of clearly defined budget categories so taxpayers can more clearly understand how tax dollars are spent and more easily compare spending from one school district to another. The TABOR proposal requires municipalities to adopt a similar style of common budget formatting and, more importantly, requires that they post their budgets on their websites. This is simple government transparency, and is a reform that is well overdue.
Also well overdue is real accountability in Augusta. That is, more than anything, what TABOR will finally bring about. No more false promises, no more loophole-laden “spending caps” designed by politicians in Augusta looking out for their own interests. TABOR is about one thing – letting the people choose.
For more information and additional reports, contact The Maine Heritage Policy at www.MainePolicy.org or 207.321.2550