Lawmakers on Thursday advanced a bill to eliminate a new program that freezes property taxes for people over 65, including wealthy property owners, and replace it by expanding two existing tax relief programs targeting lower-income seniors.

Sen. Nicole Grohoski, D-Ellsworth, who co-chairs the Taxation Committee, said that the proposal would result in more financial assistance for low-income seniors, who would receive up to $500 under the new program, compared to the current average benefit of $128 for someone living in a median-priced home.

“One of my goals in working on this alternative is to get more money to more people more quickly,” Grohoski said. “It seemed like a more fair way to distribute the same amount of resources.”

While supported by a majority of the committee, Rep. Shelley Rudnicki, R-Fairfield, was concerned about changing or taking away the senior property tax program, which has proved popular with seniors across the state, and substituting it with lesser-known programs.

“The stabilization one, for some reason, everybody’s heard about it – everybody knows about it,” Rudnicki said. “That’s why we have to be very careful to turn around now and make any major changes to something that just started.”

The committee voted 6-2 to recommend the bill, an amended version of L.D. 130, sponsored by Sen. Rick Bennett, R-Oxford, to the full Legislature, with the only two Republicans present, Rudnicki and Sen. James Libby, of Standish, voting against it, preferring to keep the current stabilization program.

The previous Legislature passed the senior property tax stabilization program with little debate in May 2022. The passage took many municipalities by surprise, as they received an estimated 100,000 applications in the first year. Cost projections for the next two years grew from $21 million to $46 million and are only expected to grow.

The program is open to anyone who is 65 or older, regardless of income, and has received the Homestead Exemption for at least 10 years, regardless of income or home value. It allows seniors to freeze their property tax bill – a benefit they can carry from one town to the next if they move.

Critics urged lawmakers to better target the program by adding income limits, but municipalities worried about additional administrative burdens. Municipalities also were concerned that the state would stop funding the program since the Maine Constitution only requires a 50% reimbursement.

Lawmakers are now proposing ending that stabilization program and expanding two existing programs – the senior property tax deferral and property tax fairness programs – to help low-income seniors avoid higher property taxes and remain in their homes. Both programs already contain income and asset limits and are targeted at lower-income seniors.

The senior property tax deferral program allows people 65 and older to stop paying their property taxes until they die, move or sell their home. The state reimburses municipalities for lost revenue and places a lien on the home, allowing it to recoup the unpaid taxes plus interest when the home is sold.

The property tax fairness credit provides a tax credit to income-eligible people for rent or property tax payments with enhanced credits available to people 65 and over. People who pay more than 4% of their income on property taxes, or more than 26.67% on rent, qualify.

The proposed changes would double both the maximum income for the tax deferral program to $80,000 and the maximum asset test to $100,000. It also would open the program to taxpayers who are delinquent on their taxes for at least 18 months. They are currently excluded from the program.

The bill also would increase the property tax fairness credit for people 65 or older by $500 to $2,000 and establish a new $4,000 benefit base, which is used to set the benefit amount, for seniors regardless of filing status. That change would allow a surviving spouse to receive the same assistance after their partner passes away.

The proposal was enthusiastically endorsed by committee Democrats, who said the new stabilization program is unsustainable because of its ballooning costs and could lead to tax shifts in communities if the state stopped cutting back funding to municipalities.

“This was a pie-in-the-sky bill that slipped through,” Rep. Ann Matlack, D-Spruce Head, said of the stabilization program. “What we have now is something that will target people who are in need.”

“This is the best work we could have come up with,” said Rep. Joe Perry, D-Bangor.

But Rudnicki and Libby said they preferred to continue working on the existing stabilization program. They suggested eliminating the requirement that seniors apply for the property tax freeze on an annual basis unless they invest $20,000 or more worth of improvements.

“When my district heard about this, people ran to the town hall,” Libby said of the stabilization program. “They now have a program they believe in that’s extremely popular. I’m not going to be the guy to vote against it.”

Rudnicki is concerned that low-income seniors, who by and large do not have to file tax returns, would have to do so to access the property tax fairness credit and don’t even know about the existing property tax deferral program.

The proposal won the support of the Maine Municipal Association, which advocates for cities and towns, and a nonprofit that advocates for seniors.

“It does not put property tax revenues at risk and shifts the burden of administration to the state,” MMA lobbyist Kate Dufour said. “The use of the state deferral process, as well as amendments to the Property Tax Fairness Credit, will better target aid to those who are most in need. It is an excellent solution that we urge the committee and Legislature to support.”

John Brautigam testified in support of the proposal on behalf of the nonprofit Legal Services for the Elderly.

“There’s a lot to like about this package,” Brautigam said. “It’s more money for more people and we’re comfortable with that.”