Revenues down, spending limited

Posted Aug. 12, 2009, at 7:14 p.m.

AUGUSTA, Maine — For the third consecutive month, revenues did not meet projections with July estimates falling short by $11.8 million.

With the red ink growing, Gov. John Baldacci has taken steps to further reduce state spending.

“The governor has told us to take some additional steps to hold down spending,” Finance Commissioner Ryan Low said in a Wednesday interview. He said all hiring requests must go through his office and he is “turning the screws” in that process to slow hiring and is scrutinizing every request to make sure the position absolutely must be filled.

“The governor has also asked us to work with the purchasing department and take a look at state contracts and see if there is the opportunity there to fund some efficiencies,” Low said.

He said another area where there will be additional efforts to limit spending is out-of-state travel. He said while it was already difficult to get approval for out-of-state travel, it will now be more difficult.

“I think August [revenues] will be critical to see if there is a trend and that we have to do more,” Low said. “There was some good news in that while the two major lines were down, all the others were on target or a little above. That is not what we saw in May and June.”

Mike Allen, research director at Maine Revenue Services, told the Appropriations Committee on Wednesday that revenues are seeing their most dramatic decline since 1991. He said both income taxes and sales taxes are significantly down from a year ago.

“We went back to 1975 and we have never had a 12-month period where we saw a negative 5 percent in the sales tax line,” he said, “so this has not only been deep, it has been prolonged.”

Members of the committee said they are worried that revenues have yet to stabilize since the April reprojections. They are faced with a growing budget gap between budgeted spending and actual revenues.

“That’s a gap that continues to grow,” said Sen. Richard Rosen, R-Bucksport. “I am very concerned that we have yet to see revenues meet the new projections. It makes a difficult job even more difficult.”

Sen. Bill Diamond, D-Windham, the co-chair of the committee, said he was relieved the July revenues were “only” down $11.8 million when he expected double that shortfall. He said the committee is concerned about the increasing size of the budget problem it must resolve.

“We are looking at this in two parts,” he said. “We have the $30 million that we must find in structural, ongoing savings that is in the budget. We also have to make up for lost revenues because there is not going to be a tax increase to make this up.”

Diamond said in addition, there is a $50 million hole in the current budget year from the shifting of cash reserves from the current budget year to the year that ended June 30 to keep the budget in balance.

Rep. Emily Cain, D-Orono, the co-chair of the budget writing panel said the committee has a lot of work to do to meet the growing problem. She said they plan to meet more frequently this fall to identify budget cuts for the full legislature to consider in January.

“We still don’t have a definitive trend on revenues,” she said. “We don’t know the size of the overall problem we will have to solve.”

Cain agreed with Diamond that revenues were better in July than expected, but they were still below estimates and she worries whether the amount of red ink will increase when August revenues are tallied.

“I can’t underestimate the seriousness of the problem we are facing even though we don’t know yet how bad the revenues will be off this year,” she said.

Cain said the panel took the first step Wednesday to find the $30 million in savings for the second year of the two-year budget cycle when they accepted a $500,000 savings in the construction of the statewide public safety radio network.

“I know, I know,” she said, “We still have $29,500,000 to go.”

The panel meets again today to hear presentations from the Department of Education and the Department of Health and Human Services on areas of possible budget cuts in the state’s two largest agencies.

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