Each property tax bill issued with respect to a property tax year beginning on or after April 1, 2004 must also contain the following statement, including the appropriate values, accurately calculated:

"In 2002, the Legislature and the voters established a maximum property tax rate limit of 6 mills to be applied against the just value of primary residential property, commercial, agricultural and industrial property and tracts of undeveloped property not enrolled in a current use taxation program for the purpose of financing public education from kindergarten to grade 12, beginning in 2004.__ Before these changes went into effect, the property tax rate for education purposes in (name of municipality) was____ mills and the property tax rate for municipal and county purposes was____ mills.__The property tax rate for education reflected in this bill for primary residential property, commercial, agricultural and industrial property and tracts of undeveloped property not enrolled in a current use taxation program is______mills and for municipal, county and all other purposes is______mills."

Each property tax bill issued by a municipality shall must clearly state the date interest will begin to accrue on delinquent taxes.

Sec. 4. 36 MRSA c. 105, sub-c. I-A is enacted to read:

SUBCHAPTER I-A

PROPERTY TAX CONTRIBUTION TO PUBLIC EDUCATION

§511. Purpose

This subchapter implements the 2002 amendment of Article IX, Section 8 of the Maine Constitution, which authorizes the Legislature to establish limits on the equalized property tax rates that must be paid for the purposes of financing public education from kindergarten to grade 12.

§512. Maximum mill rates established

With respect to the assessment of any property taxes for a property tax year beginning on or after April 1, 2004, the maximum property tax rate that may be applied against the value of certain properties for the purpose of funding public education from kindergarten to grade 12 is provided in this section.__In a municipality that assesses property at a percentage other than 100% of just value, the maximum mill rates established by this section must be adjusted, in the process of assessment and prior to commitment, to the mill rate that generates the equivalent revenue that would be collected if the municipality were assessing property at 100% of just value.

A.__For primary residential property, commercial, agricultural and industrial property, and tracts of undeveloped property not enrolled in a current use taxation program, the maximum mill rate is 6 mills.

B.__For property other than that listed in paragraph A, the maximum mill rate is 12 mills.

§513. Exceeding mill rate limits

The legislative body of a school administrative unit, as defined in Title 20-A, section 1, subsection 26, may vote to adopt a school budget, undertake a school construction project or otherwise obligate itself to educational expenditures in such a manner and to such a degree so as to require the application of property tax rates that exceed the limits established by section 512, except that in all such circumstances the property tax rate for educational purposes that exceeds the limits established by section 512 must be applied against primary residential property and no other class of property.

Sec. 5. 36 MRSA c. 105, sub-c. IV-B, as amended, is repealed.

Sec. 6. 36 MRSA §709, as amended by PL 1975, c. 651, §7, is further amended to read:

§709. Assessment and commitment

The assessors shall assess upon the estates in their municipality all taxes for public education from kindergarten to grade 12 in accordance with subchapter I-A and all municipal taxes and their due proportion of any state or county tax payable during the municipal year for which municipal taxes are being raised, make perfect lists thereof and commit the same, when completed and signed by a majority of them, to the tax collector of their municipality, if any, otherwise to the sheriff of the

county or his the sheriff's deputy, with a warrant under their hands, in the form prescribed by section 753.

Sec. 7. 36 MRSA §709-A, first ¶, as amended by PL 1973, c. 788, §184, is further amended to read:

The municipal officers after receipt of the valuation lists from the primary assessing areas shall assess upon the estates in their municipality all taxes for public education from kindergarten to grade 12 in accordance with subchapter I-A and all municipal taxes and their due proportion of any state or county tax, make perfect lists thereof and commit the same, when completed and signed by a majority of them, to the tax collector of their municipality, if any, otherwise to the sheriff of the county or his the sheriff's deputy, with a warrant under their hands in the form prescribed by section 753.

Sec. 8. 36 MRSA §6664 is enacted to read:

§6664.__Phaseout of program

This chapter applies only to property first placed in service on or before April 1, 2003.__Property first placed in service after April 1, 2003 is not eligible for reimbursement of property taxes under this chapter.

Sec. 9. Legislative duties. During the First Regular Session of the 121st Legislature, the joint standing committee of the Legislature having jurisdiction over taxation matters, referred to in this section as the "committee," shall develop recommendations designed to generate the additional revenue necessary to fund public education from kindergarten to grade 12. The committee must be guided by this section.

1. The committee's recommendation must be designed to fund a total allocation that is adequate to provide a high-quality education for all the students in the public elementary and secondary schools in this State and for which the entire local share is established by the property tax rate limitations established by this Act. In order to determine the total allocation that is entirely adequate to provide a high-quality education for all the students in the public elementary and secondary schools in this State, the committee shall consult with the joint standing committee of the Legislature having jurisdiction over education matters.

2. The committee may consider increases to rates or expansions to the base, or both, of any broad-based tax that provides revenue to the General Fund, and the committee shall give special consideration to expanding the base of the sales and

use tax to include services presently excluded from taxation. In addition, the committee shall give consideration to converting the State's sales and use tax to a gross receipts tax.

3. For the purpose of obtaining revenue to fund the State's share of the total allocation for education, the committee may not recommend reductions to or freezes in revenues or reimbursements that historically have been provided to or shared with municipalities or the payers of the property tax directly beyond the repeal of the homestead property tax exemption, residual savings provided by the diminishing demands on the Business Equipment Tax Reimbursement Program and whatever reductions in appropriations for the Maine Residents Property Tax program the committee finds to be warranted in light of the property tax relief provided by this Act.

4. The committee shall develop legislation establishing a municipally collected and retained excise tax on certain personal property, with the goals of balancing the State's interest in establishing a uniform, stable and competitive industrial tax obligation compared to that of other states, removing disincentives to replacement or modernization of business machinery and equipment and obtaining revenues from the personal property tax base that the Legislature considers reasonable to support municipal services and a fair share of the cost for public education from kindergarten to grade 12.

5. The committee, in consultation with the joint standing committee of the Legislature having jurisdiction over appropriations and financial affairs and the joint standing committee of the Legislature having jurisdiction over education matters, shall recommend to the First Regular Session of the 121st Legislature an educational budget stabilization fund designed to ensure that an appropriate level of educational funding revenues is retained and protected during positive economic periods to ameliorate the volatility of sales tax revenue production.

6. The committee shall submit its recommendations to the 121st Legislature for consideration during the first regular session. The Legislature may either adopt the recommendations or send one or more recommendations to the voters in November 2003 for ratification.

Sec. 10. Application date. That section of this Act that repeals the Maine Revised Statutes, Title 36, chapter 105, subchapter IV-B applies to property tax years beginning on or after April 1, 2004.

Sec. 11. Effective date. That section of this Act that repeals the Maine Revised Statutes, Title 36, chapter 105, subchapter IV-B takes effect April 1, 2004.

Sec. 12. Statutory referendum procedure; submission at general election; form of question; effective date. This Act must be submitted to the legal voters of the State of Maine at the next general election in the month of November following passage of this Act. The municipal officers of this State shall notify the inhabitants of their respective cities, towns and plantations to meet, in the manner prescribed by law for holding a statewide election, to vote on the acceptance or rejection of this Act by voting on the following question:

"If an amendment to the Constitution of Maine permitting the Legislature to establish different maximum property rates is approved, do you favor ratifying the action of the 120th Legislature whereby it passed an Act establishing a maximum property tax rate on taxes raised for education of 6 mills on primary residential property, commercial, agricultural and industrial property, and tracts of undeveloped property not enrolled in a current use taxation program and 12 mills for all other property, repealing the homestead property tax exemption and directing 121st Legislature to develop recommendations designed to generate additional revenue necessary to fund the costs of public education from kindergarten to grade 12?"

The legal voters of each city, town and plantation shall vote by ballot on this question and shall designate their choice by a cross or check mark placed within a corresponding square below the word "Yes" or "No." The ballots must be received, sorted, counted and declared in open ward, town and plantation meetings and returns made to the Secretary of State in the same manner as votes for members of the Legislature. The Governor shall review the returns and, if it appears that a majority of the legal votes are cast in favor of the Act, the Governor shall proclaim that fact without delay. This Act takes effect 30 days after the date of the proclamation only if the Governor has by that date also proclaimed that the Constitution of Maine has been amended to permit the Legislature to establish different maximum property tax rates for different classes of property and to exempt personal property from property tax if certain personal property is subject to an excise tax to be collected and retained by municipalities.

The Secretary of State shall prepare and furnish to each city, town and plantation all ballots, returns and copies of this Act necessary to carry out the purpose of this referendum.

SUMMARY

This bill is presented by the Education Funding Reform Committee pursuant to Public Law 2001, chapter 439, Part SSS as a proposal for reducing the State's reliance on the property tax for funding public education. This bill is accompanied by separate legislation to amend the Constitution of Maine to authorize aspects of the proposed changes. A minority of the committee recommends legislative adoption of this proposal. A majority of the committee supports presenting the proposal for further consideration by the Legislature rather than as recommendations of the substantive changes contained in the committee's proposal. This bill provides that the Act must be submitted to the voters for approval, and, if approved, it takes effect only if the proposed constitutional amendment is also approved by the voters.

This bill establishes property tax maximum mill rates for local costs for public education from kindergarten to grade 12. Mill rates would be limited to 6 mills for primary residential property, commercial, agricultural and industrial property, and tracts of undeveloped property not enrolled in a current use taxation program and 12 mills for all other property. Municipalities would be able to raise additional amounts for public education through the property tax but only from primary residential property. The bill repeals the homestead property tax exemption and requires information regarding the impact of the changes to be included on property tax bills. The bill directs the joint standing committee of the 121st Legislature having jurisdiction over taxation matters to develop recommendations designed to generate the additional state revenue necessary to fund public education from kindergarten to grade 12. The committee is directed to give special consideration to sales and use tax base expansions and to consider converting the State's sales and use tax to a gross receipts tax. The committee is also directed to recommend an excise tax on personal property as partial replacement of property taxes on personal property and an education budget stabilization fund designed to ensure that adequate funds are available for education costs during periods when General Fund revenues do not keep pace with education costs. Recommendations developed by the committee may be enacted by the Legislature or submitted to the voters for approval in November 2003.