Budget Revisions

Posted March 03, 2010, at 5:27 p.m.

With a slightly rosier economic outlook, it makes sense to minimize budget cuts that would harm the elderly and disabled. By restoring about $30 million in cuts to human services programs, the governor’s revised budget begins to do this. Shrinking cuts to higher education and municipal revenue sharing and eliminating a delay in state payroll are also positive.

Gov. John Baldacci on Wednesday presented his revised proposal for state spending through 2011. It comes after the state revenue forecasting committee last week revised its projections in light of better than expected corporate income tax collections as the national economy continues to improve. 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.

“The slight improvement in the economy and the increased assistance from the federal government allow us to address legitimate concerns in human services and education while also making investments in Maine’s long-term financial health,” the governor said.

Previously, he has proposed cutting some parts of the Department of Health and Human Services budget by 10 percent. This meant significant reductions in funding for nursing homes, assisted-living facilities and mental health services. In addition to leaving many Maine residents without needed services, persuasive arguments were made that reducing these services would cost the state more in the long run. In addition, up to 10,000 jobs would be lost, according to the Maine Center for Economic Policy. 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.

At the same time, many of the funding restorations Gov. Baldacci has proposed should mitigate the need to raise local property taxes. For example, he proposes to put $20 million back into the state’s share of kindergarten through 12th-grade education funding and $6 million into municipal revenue sharing. The initial larger cuts in these areas likely would have translated into property tax increases.

For this reason, Republican leaders are generally supportive of the budget package. Groups advocating for smaller cuts, especially to health and human services, weren’t sold.

“Vital programs that all Maine families and communities rely on are still facing millions of dollars in cuts,” said Lizzy Reinholt of Maine Can Do Better. Instead, she said, “we need to take a balanced approach to the budget crisis and talk not just about cuts but revenues as well.”

Given that Maine’s revenue shortage won’t end soon — it will significantly worsen when federal recovery money is no longer available — the governor’s plan is a reasonable approach.

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