AUGUSTA, Maine — Gov. John Baldacci on Friday used the emergency powers given him last spring by the Legislature to curtail state spending this year by just over $10 million. He said he took the step because federal aid was not approved at expected levels and the state revenue outlook continues to be mixed.
“I am exercising my authority to reduce spending immediately, as contained in the bipartisan budget passed last spring,” he said, “and I am aggressively implementing other administrative strategies to cut spending.”
But he did not cut appropriations for local schools or higher education. He said previous budget curtailments have hit schools hard because they have occurred during the school year and could not be planned for. But he warned schools the budget he is preparing to recommend to the next governor and Legislature will hold school subsidies at current levels and will not increase them to the 55 percent level that is in state law. State local school subsidies are currently just under 43 percent of the cost of school budgets.
“I have instructed the commissioner (of education) to make sure the message is conveyed to superintendents,” he said. “You have federal Recovery Act funds; you are not part of this curtailment, use those funds wisely.”
Finance Commissioner Ellen Schneiter said she has been carefully following state revenues. They were under projections in July and above projections in August with net revenue of $22.5 million. She said the final numbers for September revenues are a week or so away, but they appear to be about on target.
“There continues to be some uncertainty about the recession and the recovery,” she said, “and that is reflected in state revenues.”
Most of the cuts in the curtailment order — about $5.6 million — are in the Department of Health and Human Services. DHHS Commissioner Brenda Harvey said those cuts should not result in any actual reduction in services to Mainers.
“Most of these reductions are not service cuts at this point,” she said. “What we have done is tried to absorb in programs funding that would have otherwise perhaps have expanded or increased a program.”
Harvey acknowledged that there may be some undesirable consequences from the curtailment as demand for services grows and there are not the funds available to meet the demand. She said waiting lists for some services are increasing.
Most of the reduction at DHHS is not a cut; it is using $4 million from unused funds from the last budget year for foster care and adoption assistance. But there are also several programs that are reduced by relatively small amounts.
Another saving in the order was identified last month at a meeting of the Appropriations Committee. The state is borrowing money at record low rates to fund projects until bonds are sold. That will save about $1.4 million in lower interest payments.
Commissioner Schneiter said another $1.2 million in savings will be achieved by aggressively managing vacant positions throughout state government and reducing other discretionary expenditures.
Members of the Legislature’s Appropriations Committee said the governor’s order was a “prudent” step in addressing the uncertainty of the economy.
“He did exactly what he needed to do to meet the law,” said Sen. Bill Diamond, D-Windham, the co-chairman of the panel. “This was what was needed to be done to get through until the Legislature can address the budget in January.”
He said it is likely there will have to be budget changes by the new Legislature to get through the current budget year. He said there are always “supplemental budgets” that re-allocate state resources and often have to reduce spending to stay within revenues.
Rep. Emily Cain, D-Orono, said that while there is uncertainty about who will be the state’s next governor and who will be serving in the Legislature, there is no doubt the new governor and Legislature will have to adjust spending.
“The economy is still uncertain, we don’t know whether revenues will hold up, but the Legislature will have to deal with what happens,” she said.
Sen. Richard Rosen, R-Bucksport, is the GOP senator on the panel. He said the governor did what needed to be done, but cautioned there may have to be significant cuts to keep the budget in balance. He said in addition to uncertainties at the state level, Congress has decisions they must make by the end of the year that could have a huge impact on the state budget.
“There are a lot of businesses waiting to decide what they will do on tax issues until Congress decides whether the Bush tax cuts continue or are changed,” he said. Rosen said both tax and spending decisions that are on hold in Congress until after the November elections could also have an impact on state revenues.
The budget curtailment order ripples through state government and through outside agencies that get funds from the state. For example, the Maine Arts Commission budget is reduced by $1,581 and the Maine Public Broadcasting Corp. appropriation is reduced by $19,325.