AUGUSTA, Maine — For the second straight day, news of a growing state budget shortfall has left leaders scrambling to solve the problem, raising the possibility of seating an Appropriations Committee before the January opening of the legislative session.
On Thursday, Gov. Paul LePage’s administration said it now anticipates a shortfall of more than $100 million in the state’s Medicaid budget for this fiscal year.
News of the Medicaid shortfall came a day after the state’s revenue forecasting committee reduced tax collection estimates by $37 million for the fiscal year that ends June 30, 2013.
The worsening financial outlook spurred two Republican legislators who will assume leadership roles in the next Legislature to now say they would support allowing LePage to curtail state spending as soon as the law allows him to do so.
“I support the governor’s temporary curtailment proposal as a means to deal with the immediate revenue shortfall,” Rep. Kenneth Fredette, R-Newport, the incoming House minority leader, said Thursday in a statement. “Quite frankly, state government cannot spend money that it doesn’t have, and we are mandated by the state constitution to have a balanced budget.”
In the same release, Sen. Roger Katz, R-Augusta, joined Fredette in advocating for immediate spending cuts to address a $37 million reduction in projected state tax collections for this fiscal year.
“Although in a perfect world, these curtailments should be made following legislative discussion, the time crunch here warrants the governor’s approach,” Katz said.
After the state’s revenue forecasting committee announced downward projections Wednesday, Fredette and Katz said they favored addressing them as part of a supplemental budget proposal rather than through curtailment, a temporary measure that would allow government agencies to start trimming immediately.
However, after hearing more information Thursday about what appeared to be downward trends in state tax collections — and the growing Medicaid problem — that could stretch into the next two-year budget cycle, Fredette called for curtailments to minimize the size of a supplemental budget he anticipates will go before the new Legislature.
Fredette and Katz both served on the 125th Legislature’s Appropriations Committee.
“I expect a fairly sizable supplemental budget [to balance the state’s books for the fiscal year that ends June 30, 2013],” Fredette said. “The idea of curtailment, of reducing expenses quickly under executive order, makes sense now in terms of the budget for the rest of this fiscal year.”
Fredette urged LePage to provide legislators with information about the current fiscal year’s structural gap as quickly as possible so they can begin work on a supplemental budget. He also called for putting the next Legislature’s Appropriations Committee to work on a supplemental budget as soon as possible, perhaps even before the traditional January opening of the new legislative session.
“If the governor’s office is ready to come forward with a supplemental budget, we need to make sure that the Appropriations Committee is seated,” Fredette said, noting that the committee would face a daunting workload if it had to work on both a supplemental budget to close a revenue breach in this fiscal year’s budget and on a spending plan for the next biennium. LePage is scheduled to present his proposal for that two-year budget on Jan. 11.
“We’re looking to see if there’s a way to give the committee more time to work on two budgets at the same time,” Fredette said. “If we could accelerate the process on the supplemental budget, it would give us more time to work on the biennial budget.”
The state forecasting committee released figures Wednesday showing revenue projections for the two years covered by the next two-year budget falling $126.6 million short of earlier estimates.
Fredette acknowledged that he has yet to confer with the LePage administration or Democrats who will assume leadership positions and committee chairmanships in the next Legislature.
Adrienne Bennett, LePage’s press secretary, said Finance Commissioner Sawin Millett will, as he is required by law, issue a recommendation for curtailment after the revenue forecasting committee completes its revised report. She expects Millett’s recommendation, which will be delivered to LePage and legislative leaders, to be issued Friday or Monday.
“If [LePage] is comfortable with Millett’s curtailment recommendation, he will issue an executive order for temporary curtailment of allotments until the Legislature puts in place a plan, which would dissolve the curtailment,” Bennett said. Any cuts would be made equitably, in keeping with state law related to curtailment, she said.
“This isn’t slash-and-burn or the governor pulling programs out of the mix permanently. This is temporary,” said Bennett, who said Gov. John Baldacci’s administration enacted curtailments of $37.7 million, $79.8 million and $63.1 million in fiscal years 2008, 2009 and 2010, respectively.
Incoming Democratic leaders continue to await word from LePage on his plans to deal with the downward revenue forecast, according to Jodi Quintero, a spokeswoman for the Maine House Democrats.
Rep. Mark Eves, D-North Berwick, the presumptive speaker of the House for the 126th Legislature, and Senate President-elect Justin Alfond, D-Portland, are “eager to talk to the governor and get to work on this serious problem,” Quintero said. “We have some very serious challenges to work through with the governor and our Republican colleagues in the Legislature.”
“Our senior staff and advisers in the governor’s office will have conversations with leadership and keep them apprised of where we’re at,” Bennett said.
On Wednesday, Democrats voiced concern about an immediate curtailment.
“When you’re doing a curtailment, you’re doing a cut that’s not thoughtful, not strategic, and across all state government,” Alfond said.
Democrats also were irked by Thursday’s news about the growing Medicaid shortfall.
“We are incredibly concerned by the news we learned today,” said Rep. Peggy Rotundo, D-Lewiston, the lead House Democrat on the 125th Legislature’s Appropriations Committee, in a statement. “We look forward to seeing an in-depth analysis from the LePage administration detailing the shortfall. The savings initiatives passed in the prior budget are not working. We must address the real cost drivers in the state’s program.”
Health and Human Services Commissioner Mary Mayhew delivered news of the anticipated shortfall to the Appropriations Committee when it met for the last time Thursday.
“The reality is that Maine’s Medicaid spending grew 78 percent from 2002 to 2011,” Bennett said. “Stimulus funding from the federal government was reduced significantly in 2010, and we can’t make up that difference.”
The federal matching fund rate for Maine’s Medicaid programs, known as MaineCare, went from 74.73 percent in 2010 to 62.5 percent in 2012, according to Bennett.
“That created $210 million in additional state expense,” Bennett said. “The argument that it’s a good deal [to provide services for which federal matching funds are available] is not the case anymore.”
Bennett also cited an increase in MaineCare use, which she attributed to a poor economy and federal delays in responding to the LePage administration’s request to make about $20 million in MaineCare cuts, as major drivers of the shortfall.
The proposed cuts would affect coverage for 36,000 low-income people, eliminating coverage for 19- and 20-year-olds, tightening income eligibility requirements for low-income parents and scaling back Medicaid access for elderly residents who also qualify for Medicare benefits.
“The lack of federal funding compounded by the inflexibility of the federal government are two of the biggest hindrances,” she said. “Let us manage our welfare programs so we can still have a quality safety net to help those most vulnerable.”
BDN writer Matthew Stone contributed to this report.