State budget gap expected to exceed $1 billion

By Mal Leary, Capitol News Service
Posted July 27, 2010, at 9:47 p.m.

AUGUSTA, Maine — Don’t ask members of the Legislature’s Appropriations Committee to estimate exactly how big the budget gap between expected revenues and projected needs will be next session. But they say it will be big, as in a billion dollars, probably more.

“There are so many moving parts that we just won’t know until we see where everything settles down,” said Sen. Bill Diamond, D-Windham, co-chairman of the panel. “But yes, I think that’s in the ballpark for certain.”

He said the panel’s staff analysis has to use what is in existing law when developing its estimates so it includes such items as the $240 million needed to bring the state share of the cost of local schools to 55 percent. Although it’s a law, the budget has overridden that requirement every year since it was passed by referendum.

“I think we need to be honest with people and tell them up front that the state cannot afford to pay 55 percent of the cost of education,” Diamond said.

Members of both parties agreed the state couldn’t afford to meet the education requirement with the slow revenue growth after the precipitous decline in state revenues caused by the recession. The panel was also reminded the budget problem would be exacerbated by the loss of one-time federal stimulus funds.

“Many of the programs will have inflationary cost increases, although in this recession that is very low, projected to be about 2.1 percent a year for the next biennium,” said Grant Pennoyer, director of the Office of Fiscal and Program Review that provides staff to the committee. He said there are also constitutional requirements for spending, for state debt and for the state retirement system.

“If you add those together, that would add another $172 million to the shortfall,” he said.

Pennoyer said his office could account for a budget gap of about $800 million, but that does not include the Department of Health and Human Services. He said DHHS is estimating a need of another half billion dollars to keep current programs operating at current levels.

“I am not ready to go there yet,” he said.

Neither are committee members. Rep. Emily Cain, D-Orono, is the House co-chairwoman of the panel and she agreed with Diamond that while the next Legislature and Governor will face a significant budget gap, there are too many unknowns to get an accurate estimate.

“I do have a better sense after today’s meeting of all the moving parts and where they potentially could end up,” she said. “But I don’t think anybody can project the right number right now.”

Cain agreed that the budget problems facing the next session would likely be in the billion-dollar range. She said the information given the committee Tuesday by staff and by acting Finance Commissioner Ellen Schneiter means the next session will have difficult decisions to make on state priorities.

“We are going to have to answer the question of what do we want to do and what can we afford on that list of things we want to do,” she said. “There will have to be some significant policy discussions because we cannot afford to do all we would like to do.”

Sen. Richard Rosen, R-Bucksport, the GOP senator on the panel, agreed the various estimates add up to a significant budget problem that will not be resolved by “tweaking” spending or trimming programs.

“It will be a problem with a big number with a B in it, as in billion,” he said. “This is a serious problem whatever the final number is.”

Rosen said the next Legislature and governor will not only have the short-term responsibility of passing a two-year budget with less revenue; they also will have to look at the long term ability of the state to pay its obligations.

“This is a long tough recession,” he said. “The new Governor and Legislature are going to have to address the major issues facing the state with more spending than we can afford.”

He said that includes looking at the cost of state worker benefits, including retirement, and the scope of services provided by DHHS.

The panel also held a public hearing on the nomination of Schneiter as commissioner. In her testimony, she stressed that her job will include the need to stay around through the transition to a new administration and legislative session.

“We have started the work on the new baseline budget for the next budget cycle,” she said.

The panel unanimously voted to recommend her confirmation when the state Senate meets Aug. 25.

http://bangordailynews.com/2010/07/27/news/state-budget-gap-expected-to-exceed-1-billion/ printed on July 30, 2014