The Cutting Continues

Posted May 01, 2009, at 5:23 p.m.

There are lots of reasons to criticize the governor’s proposal to close a $570 million budget gap: It balances the budget on the backs of state workers. It shortchanges the state’s hospitals, universities, children — insert any group here. It takes too much money from the state’s reserve accounts.

While all of these could be true in isolation, the reality is that the state has a very short amount of time to rework its budget for the next two years to reduce expenses because of the large drop in revenues due to the ongoing recession. Given that reality, the governor has done a good job of spreading the cuts to minimize harm to the state’s most vulnerable populations and to not stifle future economic growth.

As lawmakers debate the budget, and look for alternative ways to balance it, they must do so with these principles in mind.

Many of the proposed cuts come directly from the state’s payroll, including 24 furlough days, which saves $7.8 million a year, and a freeze on merit pay increases, saving more than $9 million a year. If these measures are extended to the legislative branch, the savings would be larger.

While not raising taxes — a political nonstarter because the budget must pass by a two-thirds vote — Friday’s proposal does delay changes in the state’s rules that will put off reductions in taxes. It also, by necessity, takes more than $90 million from state reserves to balance the budget for the current fiscal year, which ends on June 30. Another $24 million would be taken from the rainy day fund next year.

Other large changes the governor proposes are to reduce state funding for schools in 2011 by $69 million, a delay in paying hospitals a portion of reimbursements that have been owed for years, and diverting $75 million in Medicaid matching funds to the General Fund. School funding will increase in 2010 in large part because of federal stimulus dollars, so this drop is not as precipitous as it may appear. Delaying $15 million of the hospital payment is better than Augusta not making any payment at all, as some have suggested.

Within the Department of Health and Human Services, the governor’s proposal attempts to reduce or eliminate programs and services rather than reduce the number of people who can access DHHS services. The result is gut-wrenching decisions that mean some people will no longer receive help that eases their daily lives. The alternative is to give no services to a larger group of people.

The governor acknowledged this difficulty. “I am proposing ideas that we would all like to avoid,” he said.

He is taking a risk in booking $30 million in savings in 2011 from a Commission to Recommend Streamlining of State Programs and Services that he would form as part of the budget. At the same time, putting that number on paper will make the panel take its work seriously. There have been numerous previous efforts to streamline government and reduce spending that have not resulted in significant savings.

Gov. Baldacci has presented a reasonable way to bridge an unprecedented budget shortfall. He also set the standard for changing his blueprint.

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