State might curtail spending up to $37M as revenues keep falling short

AUGUSTA, Maine — Gov. Paul LePage’s finance commissioner said Wednesday state agencies likely will have to curtail spending by up to $37 million in the coming weeks, the result of new revenue projections that show state tax collections continuing to come up short for this fiscal year.

State revenues have been in the red for much of the budget year, which started July 1, but the projections were revised downward even further Wednesday by the state’s revenue forecasting committee.

“We have to stop spending now temporarily so we can bring the budget into balance,” state Finance Commissioner Sawin Millett said.

Millett said the downward revenue projections — once they are completed — mean “we are in a posture of having to curtail FY ’13 revenues and expenditures to stay within this new forecast.”

Adrienne Bennett, a LePage spokeswoman, said later Wednesday that a curtailment — a temporary measure that allows state agencies to start trimming spending immediately — is an option LePage is considering and that the administration hasn’t yet made a decision.

The grim revenue news is largely the result of sales and corporate income tax collections that have come in below estimates, Millett said. Those lower numbers, he said, stem from high energy costs that pushed gasoline prices to the $4-a-gallon range earlier this year and uncertainty at the federal level over the resolution of the fiscal cliff at the end of the year. That’s when tax cuts from President George W. Bush’s time in office are set to expire and the first wave of $1.2 trillion in federal budget cuts is set to take effect unless Congress intervenes.

“It just adds to the challenge of the budget planning process we’re in now,” Millett said. “We’ll have to find ways to bring spending in line with revenues.”

Millett said the administration could unveil a curtailment plan by mid-December that would detail the areas where agencies will cut.

To start, he said, the administration would look to cut funding in areas where spending so far has been below budget. State law requires that a curtailment be applied as equitably and consistently as possible across state agencies, rather than targeting specific areas for cuts or restructuring.

Democrats, who will take over majorities in both chambers of the state Legislature next week, questioned the need for a curtailment when they’re expecting a proposal from the LePage administration in January to balance the current state budget.

“When you’re doing a curtailment, you’re doing a cut that’s not thoughtful, not strategic, and across all state government,” said Sen. Justin Alfond, D-Portland, the presumptive Senate president.

Rep. Kenneth Fredette of Newport, who will lead House Republicans in the coming session, said he also would prefer that the revenue shortfalls be dealt with as part of a supplemental budget proposal, rather than through a temporary curtailment.

“The benefit of dealing with it as a supplemental budget is you’re able to look at a far broader spectrum in terms of how you deal with what the issues are,” he said.

To complicate matters more, the forecasting committee released figures Wednesday showing revenue projections for the two years covered by the next two-year budget — which will take effect July 1, 2013 — falling $126.6 million short of earlier estimates.

The revised revenue projections set the stage for a busy budget season for the newly elected Legislature, whose members take the oath of office Dec. 5.

The LePage administration is set to unveil its proposal for the coming two-year budget on Jan. 11, followed by a supplemental budget to bring this year’s spending into balance. In addition to addressing low revenues, that budget will deal with shortfalls in the state’s Medicaid program, where the LePage administration hasn’t yet been able to make about $20 million in cuts that are pending federal approval.