121st Maine Legislature
		Office of Fiscal and Program Review
		LD 1629
		RESOLUTION, Proposing a Competing Measure under the Constitution of Maine To Reduce the Cost of Local Government through 55% State Funding of Public Education, To Reduce State Taxes by Requiring a 2/3 Vote To Raise Taxes, To Limit the Growth of State Spending to the Growth in State Personal Income and To Dedicate Excess Revenue To Provide Income Tax Relief
		LR 2165(06)
		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	$0	$5,042,033	$76,128,924
Appropriations/Allocations
	General Fund		$0	$0	$0	$20,235,995
Revenue
	General Fund		$0	$0	($5,042,033)	($55,892,929)
	Other Special Revenue Funds		$0	$0	($4,430,033)	($4,518,634)
Referendum Costs		Month/Year	Election Type	Question	Length
		Nov-03	General	Referendum	Lengthy
	The Secretary of State's budget includes sufficient funds to accommodate one ballot of average length for the general election in November 2003. If the number or size of the referendum questions increases the ballot length, an additional appropriation of $8,000 or more may be required.
Fiscal Detail and Notes
	The implementation of this bill is contingent upon approval by the voters.  If approved by the voters, this bill has the following impact.
					Projections	Projections
	General Fund Summary		2003-04	2004-05	2005-06	2006-07
	Additional Appropriation needed to fund EPS in LD 1629		$0	$0	$0	$20,235,995
	Cost of General Fund revenue growth cap at the 10-year moving average of real personal income growth		$0	$0	$0	$50,750,055
	Cost of the revenue loss associated with Real Estate Transfer Tax changes		$0	$0	$5,042,033	$5,142,874
	Net General Fund Cost (Savings)		$0	$0	$5,042,033	$76,128,924
	This bill provides for a new method of determining the state and local share of funding the cost of K-12 public education beginning in fiscal year 2005-06.  This bill includes the Essential Programs and Services model, as approved by the Legislature in Public Law 2003, c. 504, An Act to Implement School Funding Based on Essential Programs and Services, 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.  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 establishes a 10 mill cap on the full value education mill rate.  The Department of Education estimates the mill rate expectation to be 8.55 mills in fiscal year 2005-06.
	This bill also provides for a transition adjustment through fiscal year 2009-10 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 2009-10.  Since this legislation does not specify the transition amounts for fiscal years 2006-07 through fiscal year 2009-10, this fiscal note assumes that the transition adjustment declines evenly over the 5-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.
	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 1629		49.89%	47.81%	49.00%	50.50%
	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 1629				753,227,985	817,534,192
	Additional General Fund Appropriation required to fund EPS model in LD 1629 vs. P.L. 2003, c. 504				0	20,235,995
	* No adjustment in fiscal year 2003-04 and fiscal year 2004-05
	The change in the distribution of the revenue generated by the Real Estate Transfer Tax will reduce General Fund Revenue by $5,042,033 in fiscal year 2005-06 and $5,142,874 in fiscal year 2006-07 and will reduce Other Special Revenue to the Housing Opportunities for Maine Fund by $4,430,033 in fiscal year 2005-06 and $4,518,634 in fiscal year 2006-07.  The increase in the amount of transfer tax revenue that the counties may retain is estimated to be $9,472,067 in fiscal year 2005-06 and $9,661,508 in fiscal year 2006-07.
	Establishing a General Fund revenue growth cap at the 10-year moving average of real personal income growth will reduce General Fund revenue in fiscal year 2006-07 by over $50 million since this amount will be transferred to the Income Tax Rate Management Fund at the end of fiscal year 2006-07.  Beginning in fiscal year 2007-08 individual income tax revenue will be reduced as a result of the required proportionate adjustment in individual income tax rates.