LePage’s budget changes use bond delay, one-time revenue gain to fill $60 million gap

The State House in Augusta.
The State House in Augusta. Buy Photo
Posted May 08, 2013, at 6:38 p.m.
Last modified May 09, 2013, at 6:11 a.m.

AUGUSTA, Maine — Gov. Paul LePage proposes to close a new $60 million budget hole in part by continuing to hold off on issuing voter-approved bonds and digging into $16 million his budget had previously left for lawmakers to allocate as they saw fit.

LePage’s finance chief, Sawin Millett, presented lawmakers with a package of changes Wednesday. The altered budget proposal also adds new spending for struggling dairy farmers, lawyers who defend indigent clients and the state’s Medicaid program.

The package is designed to keep LePage’s budget proposal in balance after projections late last month showed state revenues may slip nearly $60 million below earlier projections over the next two years.

The budget had initially included a $16 million ending balance for lawmakers to allot for other spending priorities. Under LePage’s proposed changes, that balance would shrink to $2.7 million, giving lawmakers less flexibility for other priorities.

The LePage administration also carried over a portion of a $43 million uptick in projected revenues in this fiscal year into the next two-year cycle. The Department of Health and Human Services needed about $35 million from that amount to cover increased Medicaid costs before the June 30 end of this fiscal year.

The new spending in the package of budget changes includes $3 million for the state’s dairy farmers and $1 million more to meet obligations to lawyers who represent indigent clients.

“We’ve got a lot of [dairy] farmers that are in dire straits,” Millett told committee members. “A $3 million addition to their program would help struggling farmers get through the planting season and hopefully the next few years.”

The administration also returned nearly $2 million to this year’s budget in Medicaid payments to hospitals that lawmakers chose to delay to the next fiscal year as part of the budget-balancing supplemental package they passed in February.

“We do not want to be part of any pushes,” Millett said, noting the supplemental budget that recently took effect already delays the state’s June school subsidy payments until the next fiscal year.

On the savings side, the administration booked about $5 million from a slight uptick expected in the state’s federal Medicaid funding rate during the second year of the two-year budget cycle, meaning the federal government will make up that share. The administration, in addition, proposes $5.6 million less in debt service payments since LePage has delayed issuing about $105 million in voter-approved bonds.

LePage has promised to issue those bonds, which would fund a range of infrastructure investments across the state, once lawmakers pass his proposal to repay Maine’s $484 million hospital debt. Democrats have continued to call on LePage to issue those bonds immediately.

“We’re not going to be anywhere near going out to bonding until after July 1,” Millett said.

In addition to reduced debt service payments, the budget change package builds in $708,000 in savings from an anticipated switch to natural gas for state facilities in Augusta and Gardiner at some point during the next two years. The state’s previous efforts to switch to natural gas ended up in court after the state awarded rights to Maine Natural Gas, the award was appealed by competitor Summit Natural Gas, then overturned by an appeals panel.

The altered budget books another $400,000 in savings by proposing to spend less on placing official notices of public hearings and other government proceedings in newspapers. The budget proposes to issue a request for bids from companies that want to advertise public notices.

LePage’s original budget proposal, which has to close an $880 million gap between expected state revenues and spending obligations, has already run into stiff resistance from Democratic lawmakers, who hold majorities in the House and Senate.

Democrats at the committee level have rejected a number of the budget’s proposed cuts and Democratic members of the Legislature’s Education Committee have voted to boost education funding by $30 million beyond LePage’s proposed spending levels.

Lawmakers have yet to reach an accord on how to fill the gap created as a result, with Democrats favoring increases to certain state taxes and LePage generally opposing state tax increases.

The legislative dynamic with a Republican governor and Democratic legislative majorities has brought the possibility of a state government shutdown to the fore. Nonessential government operations would cease July 1 if lawmakers and LePage can’t reach a budget deal.

The Maine State Employees Association on Monday sent a request to bargain with state officials over the specter of what the union called an “inevitable” shutdown. The LePage administration said a shutdown is far from inevitable, though administration officials expect soon to start crafting contingency plans for a shutdown.

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