State eyes $85M hole in budget

Posted June 06, 2010, at 7:10 p.m.

AUGUSTA, Maine — The state may have a budget hole of at least $85 million when the new budget year starts July 1 because Congress has failed to extend aid to the states through enhanced Medicaid payments.

“We thought it was going to be done this spring, and it was not, and now we are almost into summer and it has not been done,” said Sen. Bill Diamond, D-Windham, co-chairman of the Appropriations Committee. “But this is why we put that language into the budget for the governor to curtail spending if Congress does not act.”

Rep. Emily Cain, D-Orono, agreed. She said state lawmakers and members of the state’s congressional delegation all believed Congress would act because several states are expecting the additional aid to balance their budgets as the recession lingers.

“What we did was the right thing to do, but if Congress does not act in the next few weeks, we will have a lot to discuss when we meet again on the 29th,” she said.

If Congress has not acted to provide the additional aid by July 1, the budget law directs the governor to start the process to curtail state spending. But Finance Commissioner Ryan Low said the language in the budget directing a curtailment will not work if the budget hole is as large as $85 million.

“I do not think it’s possible to curtail $85 million, having gone through curtailments at least three or four times,” he said. “I think what you do is go through a process to see how much you can curtail and start the process.”

Sen. Richard Rosen, R-Bucksport, said he agreed with Low. He said it is conceivable the governor will be forced to call a special session to pass cuts that are more “surgical” and not mostly across the board.

“To do that is a tremendous challenge,” he said. “It’s particularly a politically difficult challenge because you are moving into the fall election cycle.”

Gov. John Baldacci said he is ready to start the process of identifying areas to curtail spending even though he hopes Congress will act to provide the additional aid before he has to start “a very painful process.” The curtailment law limits the governor’s authority to cutting across the board, with limited ability to target spending reductions.

“The budget has to be balanced, and we will start that process if Congress fails to act,” he said.

The governor acknowledges that the curtailment process is a “blunt instrument” to cut spending and that he cannot rule out the need for a special session. He said if state revenues continue to surpass estimates, he may be able to use a smaller curtailment order until the new Legislature takes office Dec. 1.

“We’re thinking we may not have to call them in,” he said. “The new Legislature could deal with a package of cuts we would be ready to submit when they come in.”

Baldacci said he is determined to make sure the new governor does not have to deal with the issue. He said the new chief executive would have enough to do in preparing a budget for the next two years.

Whether the long expected extension of aid will occur is in doubt. It was included in a Senate-passed bill that the House refused to consider, passing its own version that did not include the aid to the states.

Maine’s two senators voted for a measure that not only provided for the additional six months of Medicaid assistance, it also extended unemployment benefits through the end of the year.

“This is a battle between the democratic leadership in the House and the leadership in the Senate,” said Sen. Susan Collins, R-Maine. “The Senate passed bill was paid for and had bipartisan support, and the House should simply pass that bill.”

Rep. Mike Michaud, D-Maine, agreed with Collins. He said his leadership took out needed programs and “porked up” the House measure with special provisions such as an extension of the new homebuyer tax credit, but only for the District of Columbia and special aid for sugar cane farmers in Hawaii among others.

“They are trying to put items that are not emergency into what should just be emergency spending,” he said. “I’m not going to support that.”

All sorts of advocacy groups are gearing up to urge passage of state aid. The National Governors Association and the National Conference of State Legislatures have launched lobbying efforts, and the union representing many state and local government workers has launched a radio advertising campaign.

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