121st Maine Legislature
		Office of Fiscal and Program Review
		LD 1394
		An Act to Modernize the State's Tax System
		LR 1697(04)
		Fiscal Note for House Amendment " "
		Sponsor: Rep. Mills
		Fiscal Note Required: Yes
Fiscal Note
					Projections	Projections
			2003-04	2004-05	2005-06	2006-07
Net Cost (Savings)
	General Fund		$0	($12,287,145)	($47,645,213)	($52,490,465)
Appropriations/Allocations
	General Fund		$0	$73,547,034	$103,797,692	$106,725,307
Revenue
	General Fund		$0	$85,834,179	$151,442,905	$159,215,772
	Other Special Revenue Funds		$0	$11,963,926	$12,447,448	$13,075,068
Fiscal Detail and Notes
	This estimate describes the total impact of the bill as amended by this amendment and not just the incremental change.
	This bill includes General Fund appropriations totalling $46,689,003 to expand the Maine Resident's Property Tax program to create the Homestead Tax Cap Program and to restore the Homestead Exemption to $7,000.  It also increases the sales tax by 1 cent effective October 1, 2004 which will increase General Fund Revenue by $93,170,660 in fiscal year 2004-05.
	Increasing the amount transferred for state-municipal revenue sharing will decrease General Fund revenue by $6,682,828 in fiscal year 2004-05.  The total increase to the Other Special Revenue funds Disproportionate Tax Burden Fund as a result of changes contained in this bill is estimated to be $11,963,926 in fiscal year 2004-05.
	This bill also makes changes to income and estate tax provisions to conform with certain provisions of the federal Internal Revenue Code.  The revenue impact of these and other changes is detailed in the table below.
					Projections	Projections
General Fund Detail			2003-04	2004-05	2005-06	2006-07
	Revenue
	Sales tax to 6%		$0	$93,170,660	$136,945,798	$143,453,332
	Change in state-municipal revenue sharing		$0	($6,682,828)	($4,649,868)	($4,868,040)
	Estate Tax conformity		$0	$0	$19,490,728	$20,308,840
	Student loan interest deduction conformity		$0	($296,443)	($202,799)	$0
	Dependent care credit conformity		$0	($587,088)	($404,888)	$0
	Earned income tax credit conformity		$0	($21,758)	($19,866)	$0
	Individual income tax - property tax reimb.		$0	$251,636	$283,800	$321,640
			$0	$85,834,179	$151,442,905	$159,215,772
	Appropriations
	Restore homestead exemption to $7,000		$0	$5,131,486	$5,259,475	$5,264,520
	Homestead Property Tax Cap Program		$0	$41,370,326	$43,063,771	$47,088,940
	General Purpose Aid to Local Schools		$0	$26,858,031	$55,339,199	$54,232,466
	Administrative and Mandate costs		$0	$187,191	$135,247	$139,381
			$0	$73,547,034	$103,797,692	$106,725,307
State Mandate
	New or Expanded Activity				Unit Affected	Costs
	Administrative activities associated with the change in the homestead exemption.  The bill reimburses municipalities for this mandate.				Municipality	$33,500
	This bill also includes the Essential Programs and Services model, as approved by the Legislature 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's share to increase to 55% by fiscal year 2009-10 versus the 50% requirement in PL 2003, c. 504.
	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 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 2009-10
			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		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 (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 1394, as amended		49.89%	47.81%	52.60%	52.60%
	Estimated General Fund appropriation needed to fund K-12 education based on EPS model approved in P.L. 2003, c. 504 (See Note)			738,959,910	753,227,985	797,298,197
	Estimated General Fund appropriation needed to fund K-12 education based on LD 1394, as amended			765,817,941	808,567,184	851,530,664
	Additional General Fund Appropriation required to fund EPS model in LD 1394, as amended vs. P.L. 2003, c. 504			26,858,031	55,339,199	54,232,466
	Note:  The Governor's proposed 2nd supplemental budget ( LD 1919) includes $13,549,334 additional appropriation in FY 2004-05 for General Purpose Aid for Local Schools.
	This fiscal estimate is based on current law.  LD 1919, the Governor's proposed 2nd supplemental budget, includes changes to the estate tax (Part D) and transfers certain items from the sales tax to the service provider tax (Part V).  If LD 1919 passes without amendment, the revenue increase in this bill will be reduced as indicated below.
					Projections	Projections
			2003-04	2004-05	2005-06	2006-07
	Revenue in this bill without LD 1919		0	85,834,179	151,442,905	159,215,772
	Revenue in this bill with LD 1919		0	78,889,215	111,209,564	113,949,964
	Revenue reduction if LD 1919 is enacted		0	6,944,964	40,233,341	45,265,808