LePage orders $35.5M in temporary state spending cuts, including $12.6M in school aid

AUGUSTA, Maine — Gov. Paul LePage on Thursday ordered state agencies to make $35.5 million in temporary cuts to keep the current year’s budget in balance as state revenue collections fall short of earlier projections.

While nearly every agency will have to trim expenses as a result of the order, almost three-quarters of the cuts will come from Department of Health and Human Services programs and state aid to public schools. Those two areas account for approximately 70 percent of the state budget.

In a letter to school officials, Education Commissioner Stephen Bowen said the curtailment will cut $12.58 million from state education aid. In Bangor, for example, that will mean a $271,000 cut from the $16.48 million the city originally was allotted in the state budget. For Portland, that means an $870,000 cut from its aid package of $14.06 million.

School districts won’t see reductions in their monthly subsidy checks until the Legislature acts on the school aid cuts.

“Many of them have already begun freezing discretionary spending, limiting purchases,” Finance Commissioner Sawin Millett told reporters Thursday afternoon. “I think most superintendents have already begun planning on this eventuality.”

The Department of Health and Human Services will have to reduce spending by $13.43 million. Among other areas, those cuts will affect subsidies families receive for child adoptions, and funding set aside for contracts the department has not yet issued and for which spending has come in under budget.

“The contract review has been really comprehensive,” Millett said.

The Health and Human Services cuts affect programs throughout the agency, including the Bureau of Mental Health, independent living services for people with disabilities, the Office of Substance Abuse, and the Riverview and Dorothea Dix psychiatric centers in Augusta and Bangor, respectively.

“They went as far as they could without direct-service impact,” Millett said.

In a number of other departments — from the Department of Corrections to the attorney general’s office — the LePage administration booked savings by leaving vacant positions unfilled.

Among the other areas affected, the University of Maine System will have to cut about $2.5 million by reducing administrative expenses; the Maine Community College System will take $724,000 in cuts that are expected to result in course and faculty reductions, and a smaller budget for college courses for high school students; and the state Legislature will have to cut $333,000 in operating expenses.

The $35.5 million curtailment is a temporary measure to keep the budget in balance as state revenue collections slip. State law requires that the cuts be made as equitably as possible across state agencies and programs. The law also bars the governor from using a curtailment to eliminate programs or to cut retirement system and debt service payments.

The reductions remain in effect until lawmakers take action.

Curtailment has been a likelihood for nearly a month, since the state’s Revenue Forecasting Committee revised its tax revenue projections downward for the current budget year, as a result of sales and income tax collections — both corporate and individual — that have come in below estimates.

Millett formally recommended at the start of December that LePage order a curtailment. Since then, the governor and others in the administration have met with state agency heads to determine where to make cuts.

While the curtailment is designed to prevent spending overruns, the $35.5 million in cuts are not the only measure that will be needed to keep the budget balanced.

LePage’s administration is expected soon to propose a supplemental budget package to address a $100 million shortfall in the state’s Medicaid program that the administration attributes to an increase in the use of Medicaid services and the state’s inability to make about $20 million in Medicaid cuts that federal officials have yet to approve.

Millett said Thursday the supplemental budget — which he said will be ready by Jan. 11 and will include the reductions made through the curtailment — is unlikely to cut state education aid further.

“We’re steering as clear and far away from that as possible,” he said. “This one curtailment is seen as a sufficient challenge for 200 school systems, as well as parents, teachers and students being impacted.”

Millett said the administration will likely introduce its supplemental budget proposal at the same time it unveils its proposal for the next two-year budget, which will take effect July 1. That budget also will be complicated by a diminished revenue picture: Recent estimates project that tax revenues will fall $125.2 million short of earlier forecasts during the two-year period.

Legislative leaders said Thursday they plan to convene the Legislature’s budget-writing Appropriations Committee next week, ahead of the full Legislature, to review the spending cuts that are part of the curtailment.

The new Legislature’s Appropriations Committee — chaired by Democrats Sen. Dawn Hill of York and Rep. Peggy Rotundo of Lewiston — will meet Jan. 4. The full Legislature reconvenes Jan. 8 for the new session.

By convening early, lawmakers on the appropriations panel can get a head start on understanding how the cuts contained in the curtailment will affect Maine residents, said House Speaker Mark Eves, D-North Berwick.

“At this point, it’s hard to determine in a document what the impact will be,” he said. “We’re looking forward to the public hearing process and the public weighing in on what the priorities will be.”

Eves said he was most concerned about cuts to education aid and funding reductions for mental health services, adoption subsidies and foster care.

LePage spokeswoman Adrienne Bennett said the adoption-subsidy cuts also concerned the governor.

Eves said lawmakers could change parts of the curtailment package as part of the coming supplemental budget.

“I would anticipate some changes, but without reviewing the details and going through the public process, it’s hard to determine what they might be,” he said.

Republican leaders in the House and Senate said the curtailment, while difficult, is necessary to balance the budget.

Rep. Alexander Willette of Mapleton, assistant House Republican leader, said the state can afford to make cuts, given the size of its welfare system.

“Maine has the second-largest welfare system in the country, so there’s room to cut spending without hurting our most vulnerable or raising taxes on working people,” he said in a statement.