Superintendent Maria Libby is grateful that in her 28 years with her Camden-based school districts, voters have never rejected a school budget.

But she also knows that her residents shoulder a greater tax burden than others in the state.

“I am painfully aware of the implications of what we’re doing on taxpayers,” Libby said.

Across Maine, the amount of money school districts receive from the state varies widely thanks to a complicated formula that is based largely on property tax valuations. The state is committed to funding 55% of education costs statewide, but while some districts get as much as 80% of their annual budget paid by state dollars, others get none.

One of the districts Libby leads, School Administrative District 28, has been among those that receive no funds. The other, Five Town Community School District, receives just 17% of its funding from the state.

The reason the share is so low is because property values in those coastal communities are so high. In three of the district’s towns — Camden, Rockport and Lincolnville — the median household income is average for Maine, yet residents there pay hundreds more in their annual property tax bill to cover education than the state average.

That disparity was highlighted in a new report from the Maine Educational Policy Research Institute, a nonpartisan research group funded by the University of Maine System and the state Legislature. The report is the latest push to study and potentially reform Maine’s complicated school funding formula, which can disadvantage certain communities, like Camden, where experts say waterfront property and large numbers of second homes drive up property values.

The 200-page report also tackles other issues, including special education and regional adjustments for salaries, that school leaders have said make the decades-old system inadequate and inequitable.

“At a town level, things can look very different than they do at the individual taxpayer level,” said Amy Johnson, one of the primary researchers.

The current system was created in 2004 with the intention of assessing how much districts need to spend to provide an adequate education, and then fairly allocating state subsidies based on how much local communities can afford to cover. But Johnson said it’s not granular enough to distinguish between town-level wealth and the ability of individual homeowners in those towns to afford their bills.

It has been studied several times over the years, including through a comprehensive review in 2013, although lawmakers did not adopt any of its proposed changes. The latest report was commissioned by the Legislature, and came amid advocacy from school administrators and lawmakers who said the formula doesn’t reflect the current realities of providing adequate educational services.

This past spring, researchers gave presentations to members of the Education and Cultural Affairs Committee, where they laid out changing demographics that have affected the formula’s effectiveness: Maine has seen a 19% decline in K-12 enrollment between 2001 and 2023, while education spending has basically doubled during that time, outpacing inflation.

The problem with any change to the formula is the possibility that some districts will be “winners” and others will be “losers,” something superintendents said they want to avoid. Any changes ultimately must be approved by lawmakers, which could happen as soon as next session.

With the release of the new report, researchers have now been tasked with modeling how some proposed changes would impact individual districts, a step Johnson said hasn’t been taken before.

ABILITY TO PAY

Proportionally, Maine overall has among the highest reliance on property taxes in the nation, according to the report. The state ranks first in property taxes as percentage of personal income, third for reliance on property taxes as a source of state and local revenue, and seventh in per-capita property taxes.

In many Maine communities, the majority of property taxes go toward education, often the largest budget item in municipal budgets.

The current formula calculates how much districts need to provide “essential” educational services on a per-pupil basis, also accounting for factors like school isolation, special education and transportation. The calculation for what proportion of that cost the state will fund is based on property tax valuations, then is adjusted for debt service and special education, among other things.

In most situations, residents in towns with higher valuations have higher incomes, but that’s not always the case. In 19 Maine communities, including Camden, Damariscotta and Poland, their median income is on par with the state average, but education tax bills are high, the report says. That’s attributable to high property valuations driven by factors like housing demand, or a high rate of waterfront property and vacation homes.

There are also 46 communities where residents spend a higher percentage of their income on education tax bills, more than the average 3.3%. Of those communities, 37 are towns with low or average incomes, including Portland, Biddeford, Belfast and Arundel.

Kerry Leichtman is the town assessor for both Camden and Rockport, a job which brings him face to face with the realities of the formula. In Camden, Leichtman said property taxes went up 44% in just one year between 2023 and 2024. As a result, he said, some residents are being taxed out of their homes. Yet the towns have received no state education subsidy under the current formula. This coming year, for the first time, they’ll get 1.7% of their funding from the state.

“We almost get penalized because of the summer population,” Leichtman said. “The formula doesn’t take into account that we have an awful lot of typical demographics, rather than extraordinary demographics. So, I think that the local people suffer under less help or no help from the state for that reason.”

Libby, the superintendent, likens it to a few geniuses driving up a class grade point average. Meanwhile, she said, kindergarten enrollment is declining because there isn’t enough affordable housing for young families.

“I hear more and more regular, middle class people talking about the difficulty of paying their taxes now and wondering how they’re going to be able to afford to pay their taxes and keep their homes. So, I do think it’s a real issue,” Libby said. “The way I look at it, going forward, is that we have to keep support for our school budgets without breaking the backs of the people who are paying the taxes and the people who live here year-round.”

Five Town CSD voters rejected a bond project to improve the high school earlier this year, and Libby said she is generally wary of putting expensive projects out to voters because she knows they already pay disproportionately high taxes.

Several larger southern Maine cities — including Portland, South Portland, Westbrook, Saco, Biddeford and Brunswick — are also examples of communities with average income but high tax bills.

In Brunswick, which gets 47% of its school funding from the state, Superintendent Phillip Potenziano said district leaders are able to make their funding work thanks to strong collaboration between the district and Town Council, and Brunswick’s school budget typically passes by wide margins.

But he said he has heard from constituents who have concerns about rising taxes, and he knows the formula can be inequitable for other districts, both minimum receivers and high-need communities.

“We’re all concerned about rising taxes,” Potenziano said. The goal for the formula, he said, should be, “ensuring that all districts are provided equitable financial solutions.”

SOLUTIONS

The report concludes that because of the discrepancy between income and property wealth, adding to the formula “some measure of income-based ability to pay” could improve equitability. Johnson, the researcher, said figuring out how to do that will depend on what values lawmakers decide are most important to Maine.

A possible option involves factoring in a town’s economically disadvantaged student rate, which is based on free and reduced lunch data already collected for other purposes, a method currently employed in Rhode Island.

Researchers modeled two formulas that would combine property tax value and the economic disadvantage rate to determine a town’s ability to pay. Both resulted in a more progressive distribution of state funding, with high poverty districts gaining more in state funding, the report found.

“Neither model had unintended consequences: none of the high poverty towns were ‘losers’ and none of the low poverty towns were ‘winners,”’ it reads.

The study also outlines revenue options outside of property taxes, including increased state income taxes, higher seasonal and commercial tax rates or a statewide education property tax, options which are used by many other states.

Johnson said it’s unlikely the formula would ever be completely divorced from property values, because those taxes are what towns use to raise money for education. However, she said, there are also options outside of the formula.

“If the goal is to make sure that the towns with the least resources are able to raise money, that’s a different question than if each individual in the town is able to afford their tax bill,” she said. “So you need to have both the state-level system that is looking at town wealth, and individual tax relief measures.”

She pointed to several potential ideas, including freezes and caps on property tax payments for low-income seniors and the disabled and deferred payment programs for people who have increasing property value and taxes but stagnant wealth.

WHAT’S NEXT?

The researchers’ work isn’t done yet.

Rep. Michael Brennan, D-Portland, sponsored the legislation that set the report in motion. He then put forward a resolution this year that asks the researchers to dig deeper into two aspects of the report — regional adjustments and special education — and provide statistical modeling on how those changes would affect individual school districts.

Brennan said the committee will take up the report’s suggestions and review the modeling when members return to Augusta, likely in December, and then potentially craft and pass a bill based on the ideas.

Johnson, the researcher, said the formula has been studied many times before, but often just as its individual components; this is the most comprehensive review since 2013, which failed to result in any changes.

Still, Johnson said, the energy around the issue from lawmakers is unlike any she’s seen before.

“They seem to have a resolve to want to take action,” she said, “and they’re looking for really tangible, actionable advice, so that feels different. They haven’t asked for that before.”