Budget year starts $1.2 million in red

Posted Aug. 23, 2010, at 8:06 p.m.

AUGUSTA, Maine — The state started the new budget year in the red with July revenues $1.2 million below estimates. With that rough start, Gov. John Baldacci has ordered state agencies to report by Sept. 1 their proposed cuts to meet the $23 million budget hole still facing the state.

The state had been looking to find cuts to make up $100 million. But since Congress released more Medicaid funds to the states earlier this month, the revised target is $23 million.

“We certainly want to thank our congressional delegation and Congress for providing the aid they did,” Baldacci said.

But the governor said cuts still have to be made and the state has to keep all of its options open.

To that end, Baldacci ordered Acting Finance Commissioner Ellen Schneiter to send out new budget cut targets to all state agencies last Friday.

Both Baldacci and Schneiter pointed out that while several revenue lines were below estimates, it was not by large amounts. Baldacci said he is encouraged that sales tax numbers continue to exceed estimates by $1.7 million in July.

Schneiter acknowledged that if revenues had been significantly above estimates, as they were in the last few months of the budget year that ended June 30, there might not have been the need to go through the process of identifying budget items the governor could curtail by executive order.

“Our goal is to give him as much information and options as possible if he decides to go with a curtailment order,” she said.

Sen. Bill Diamond, D-Windham, the co-chairman of the Legislature’s Appropriations Committee, said the July revenues are disappointing but not unexpected. He said the caution from the revenue forecasters had been that growth in the economy would be slow, and month-to-month revenue fluctuations were to be expected. He said state agencies should keep the list of $100 million in potential cuts because they may be needed before the budget year ends next June 30.

“I’m suggesting don’t throw those away, boys and girls, we may be having to look at those, so keep that information at hand,” Diamond said.

Sen. Richard Rosen of Bucksport, the GOP senator on the committee, agreed. He said that while there is nothing in the revenue report to worry him, there is little to encourage him that revenues are going to grow in the current budget year.

“The unemployment rate that was released last week showed a slight uptick in those numbers,” he said. “We will not see revenues significantly improve until more people are back to work.”

Maine’s unemployment rate went from 8 percent in June to 8.1 percent in July. That represents 56,200 Mainers — or about the combined populations of Bangor and Augusta — who were out of work and looking for work in July.

Rosen said the governor is being prudent in continuing the process that could lead to curtailing spending in October and agreed with Diamond that agencies should keep their budget notes handy because further cuts may be needed before the budget year ends.

“I don’t think anyone is surprised that some of the revenues are all over the place,” said Rep. Emily Cain, D-Orono, the House co-chairwoman of the committee. “We were all warned that the recovery would be slow and bumpy, and the revenues show that.”

She was pleased that the sales tax continued to meet expectations for four months after failing to meet projections for more than a year. She said that may be an indicator the economy is starting to grow again.

“We are not terribly in the red,” she said.

Cain said she is grateful for Congress providing additional aid, even though it was not as much as the committee had built into the budget.

Schneiter said the new budget memos are due Sept. 1, and the governor will have the month to decide whether to use his budget curtailment authority to reduce spending until the new Legislature can deal with the budget shortfall.

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