Budget gap doubles from earlier projections

Posted April 08, 2009, at 9:04 p.m.

AUGUSTA, Maine — Legislative negotiators say they are preparing for a General Fund budget hole of at least $350 million, more than double the gap Gov. John Baldacci originally sought to address in a $6.1 billion two-year spending package.

In fact, the Senate chairman of the Appropriations Committee, Sen. Bill Diamond, D-Windham, said he used a range of $350 million to $500 million on the Senate floor this week to get other legislators used to thinking about a problem of that magnitude.

“We don’t know what it is officially,” said the House chairwoman of the Appropriations panel, Rep. Emily Cain, D-Orono. “But we are working under the assumption that it is going to be serious.”

Republicans are using the same range of estimates, said Rep. Sawin Millett, R-Waterford, adding that $350 million was being treated as “probably on the low end.”

A definitive determination by the state’s revenue forecasting committee is due May 1. Lagging tax receipts have made a downward reprojection all but certain.

For weeks, Democrats who hold strong majorities in both the Senate and House have suggested it would be best to enact a budget in advance of May 1 based on what is known now and then adjust it as needed later.

But on Wednesday Cain softened that stance, saying decisions by the end of April would be ideal but that a timetable was uncertain. Millett, who along with other Republicans has suggested holding off, said a mid-May target for final Appropriations Committee action had been discussed.

Both Cain and Millett agreed that, to date, despite proposed budget cuts that would eliminate more than 300 jobs, negative response has been limited.

“What I don’t know is whether people are holding their powder or whether they understand things are hard and they’re going to have to live with it,” Cain said.

Millett said for now, Democratic and Republican negotiators have focused on spending in an effort to keep a budget package in balance.

“Nobody’s talking about tax increases,” he said, noting that flexibility built into portions of the federal stimulus money may ease some budgetary pressures.

By one count, lawmakers began their deliberations on a two-year spending package from a most daunting vantage point, facing a gap between spending demands and anticipated revenue of $965 million.

That structural gap figure, however, relies on some trends, assumptions and statutory requirements that are routinely revised or discounted.

A more conservative gap estimate was pegged at $340 million, and that has been what the governor and legislative budget writers have been trying to cover through cuts, deferrals, minor taxes and fees and increased federal funding.

An analysis by the Appropriations Committee staff credits the Baldacci administration with proposing about $425 million in cuts and $62 million in tax and fee increases to offset $148 million in spending initiatives.

In line with Baldacci’s approach through six years as governor, the package would not increase the state’s income or sales tax.

Recently, Maine’s Consensus Economic Forecasting Commission, which helps shape the budget debate, concluded the recession will be much deeper than was projected in November and that Maine appears to have felt the effects of the national recession much later than other states.

The panel projects job losses from the end of 2007 though mid-2010 at about 36,000 — twice as many as predicted in its previous forecast.

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