The news that Maine’s revenues for the next year and a half aren’t expected to be as depressed as initially feared gives the governor and lawmakers a little room to maneuver in crafting a new state budget. They should use that room to eliminate the worst gimmicks — such as delaying state pay-checks to put the expense off to a future year — and to minimize cuts that will harm the state’s most vulnerable citizens and stifle job growth.
The state revenue forecasting committee this week revised its projections in light of better than expected corporate income tax collections. Although state revenues are still predicted to be lower than in recent years, the drop is now expected to be smaller. In November, the committee predicted that general fund revenue would decline nearly 6 percent in this fiscal year. It now foresees a 4.7 percent drop. The decline in fiscal 2011 is now expected to be 2.4 percent compared to the 2.7 percent drop predicted this fall. The result is that revenues are predicted to be nearly $51 million higher than expected for the 2010-11 biennium.
In another positive development, the state learned it would receive an unexpected $27 million in Medicare payments from the federal government. As a result, the state budget shortfall now stands at about $360 million, rather than $438 million.
This doesn’t mean there is extra money to spend, but rather that some cuts won’t have to be as deep — and that some creative financing tricks can be ditched.
The first to go should be the “payroll push,” a scheme that moves a few days of payroll into the budget cycle that will fall under the next governor’s tenure. By doing so, the state would save $3 million, restore some longevity raises and eliminate three state shutdown days. This is akin to post dating the rent check to ensure the paycheck is deposited before the landlord goes to the bank. The payment will be made, but it is up to the next administration to decide where the money comes from.
As they reassess cuts, lawmakers must ensure that their top priority is to maintain necessary social services.
Because they account for about 80 percent of state spending, education and health and human services will see big funding reductions. The difficult task for lawmakers is to determine which services can be trimmed with minimal harm and which are essential for daily living, especially for those with mental illness and the elderly who have few options.
While it is popular to criticize state employees and those who work for nonprofit agencies, these people provide valuable services — often ones that private companies don’t because there isn’t money to be made — and they put much of their money back into the state economy. An analysis from the Maine Center for Economic Policy, a liberal think tank, found that the budget cuts proposed by the governor would result in as many as 10,000 jobs being lost in Maine. The loss of so many jobs would further depress the economy as fewer people would have money to spend, which translates into less revenue for the state and for local companies.
This is not a road lawmakers should want to travel.
This week’s revenue reprojections give them another path.