Maine – Municipal Revenue Sharing is Restored to 5%

Governor Mills Announces Municipal Revenue Sharing is Fully Restored to Five Percent

Governor Mills & the Legislature increased revenue sharing every year since 2019, helping offset the need to increase property taxes to deliver municipal services

Augusta, MAINE – Governor Janet Mills announced that her Administration has fully restored municipal revenue sharing to five percent, as required by Maine law.  It is the first time since 2009 that revenue sharing has been funded at the full 5 percent.

State law has long required that the State of Maine send revenue back to municipalities to help finance municipal services so that a municipality does not have to rely solely on property taxes to provide those services.  However, the State has long failed to meet the 5 percent required under law.  Under the previous administration, revenue sharing had been reduced and held flat at a meager 2 percent.

Upon taking office, Governor Mills and the Legislature worked together in a bipartisan manner to fully restore revenue sharing.  As a result, revenue sharing has increased every year since she took office, improving to 3 percent in Fiscal Year 2020, to 3.75 percent in Fiscal Year 2021, to 4.5 percent in Fiscal Year 2022, and now to the full 5 percent in Fiscal Year 2023.

“After years of cuts and neglect, I am proud to say that my Administration and the Legislature have fully restored municipal revenue sharing, as the voters demanded long ago,” said Governor Janet Mills.  “This is not only basic good governance, but it is an important source of funding for cities and towns that helps deliver all manner of municipal services, like EMS or education, and holds down property tax increases that can hurt older people on fixed incomes.  My Administration will continue to work with the Legislature in a bipartisan manner to strengthen municipal services and deliver property tax relief to Maine people.”

“When the previous administration slashed the revenue sharing program in favor of tax cuts for the wealthy, they turned their backs on municipalities, property taxpayers, local law enforcement and first responders.  Since then, my colleagues and I have fought tooth and nail to restore the program and do right by the Maine people,” said Senate President Troy Jackson.  “After seven years, I’m proud to report that we have fully restored the revenue sharing program, which will ensure that municipalities can provide vital services without shifting the cost onto property taxpayers.  Maine people deserve a government they can count on — one where elected officials stand by their word and make good on their promises.  I’m just glad we could deliver.”

“Maine voters demanded fairer revenue sharing at the ballot box back in 2004.  All these years, towns have wanted – and needed – help covering the services we all rely on, like law enforcement, teachers, firefighters, and public works.  It was a no-brainer for Republicans and Democrats in the House to support Governor Mills’ initiative to get this done in a bipartisan manner.  Maine towns can be proud of this, and thanks to sound fiscal management, they can count on the State’s commitment to revenue sharing because our rainy day fund now stands at a record high of over $895 million in savings,” said Speaker Ryan Fecteau of Biddeford.

“The restoration of funding for the Revenue Sharing Program to 5 percent of state sales and income tax revenue is step towards strengthening the state-municipal partnership.  These revenues reduce the burdens placed on property taxpayers, and recognize that municipal economic development efforts support the State’s economic vitality,” said Catherine Conlow, Executive Director of Maine Municipal Association.  “After enduring over 15 years of reductions, municipal leaders are relieved that the Mills Administration and Legislature recognize the importance of this program and the contributions of municipal leaders.”

Restoring municipal revenue sharing is part of the Governor Mills’ commitment for the State to meet its long-ignored statutory obligations.  Under Governor Mills, Maine has also fully funded the State share of education costs at 55 percent for the first time in history and, after years of needless delay, expanded Medicaid, as overwhelmingly approved by Maine voters in 2017.

Meanwhile, the Governor has worked with the Legislature to deliver tax and property tax relief in other ways, including:

  • launching the State Property Tax Deferral Program, a lifeline loan program through the Governor’s Maine Jobs & Recovery Plan that can cover the annual property tax bills of eligible Maine people who are ages 65 and older or are permanently disabled and who cannot afford to pay them on their own;
  • expanding the Homestead Exemption, allowing Mainers to take $25,000 off the value of their home and only pay property taxes on the remaining amount through the Homestead Exemption Program.  Until Fiscal Year 2023, municipalities were reimbursed by the State at 70 percent of the cost.  Moving forward, the reimbursement will be increased by 3 percent each year until the state fully reimburses the municipalities to cover the full cost of the program;
  • exempting additional Maine retirement pension from income tax, improving the deductions for residents from $10,000 to $25,000 in tax year 2022, to $30,000 in tax year 2023 and to $35,000 in tax years 2024 and beyond. This will provide $36.8 million in income tax relief for Maine retirees in 2022, with an average tax cut of $560 in just the first year.  Retirement pension income from any source will be tax exempt in Maine up to $35,000 per individual by tax year 2025, providing an annual average tax cut of approximately $795. Military pensions and annual social security income remain fully exempt in Maine;
  • improving the Property Tax Fairness Credit.  An estimated 100,000 low- and middle-income property owners and renters who pay more than 4 percent of their household budgets on property taxes or rent will be eligible for a refundable tax credit valued at up to $1,000 each year, with an even more generous $1,500 in maximum relief extended to seniors;
  • increasing the value of Maine’s Earned Income Tax Credit (EITC), which provides a refundable tax credit to working Maine people and families so families can afford necessities and fight poverty.  The increase is estimated to help 100,000 Maine people, primarily working families with incomes of less than $57,414, by increasing the maximum benefit by an average of $400 per family, bringing the total EITC benefit per family to an average of $764 per year;
  • exempting the sale of menstrual products from sales tax:  Maine is abolishing taxes on these sales to remove barriers to accessing necessary menstrual products;
  • providing an annual $2,500 or up to $25,000 lifetime refundable tax credit benefit for student loan debt relief.  The supplemental budget overhauled the Education Opportunity Tax Credit and transformed it into a powerful, nation-leading tool to retire student debt for graduates and help employers to draw people from all walks of life to work and live in the State of Maine.

The Office of the State Treasurer distributes funds to municipalities on a monthly basis according to a set formula that relies on state valuation, tax assessment and population.  July 2022 was the first payment processed at the improved 5 percent rate.  The increase from 4.5 percent in Fiscal Year 2022 to 5 percent in Fiscal Year 2023 represents an additional $23.3 million to Maine cities and towns.

“This achievement is another testament to the Governor’s determination to meet the State’s obligations to Maine people,” said Kirsten Figueroa, Commissioner of the Department of Administrative and Financial Services (DAFS).  “A fully restored revenue sharing will help towns and cities with their budgets, delivering more funding for services and lifting a burden off the shoulders of Maine’s property tax payers.”

“The Treasurer’s Office works with each of Maine’s towns and cities to deliver this vital aid that supports community safety and services and keeps pressure off of homeowners and business who pay property taxes,” said Henry Beck, State Treasurer.  “We can finally keep our promise and send this full share of revenue thanks to Governor Mills and the Legislature.”

The Department of Administrative and Financial Services estimates Revenue Sharing at 5 percent to be $233,372,787 for Fiscal Year 2023.  For comparison, Revenue Sharing at 2 percent would have delivered only $93,349,115 to municipalities, a difference of more than $140 million.  Revenue sharing is funded by a percentage of sales, service provider, personal and corporate income tax receipts.