Gov. John Baldacci turned up the heat on legislators to close a $190 million gap in the budget Monday by asking his staff to prepare an emergency curtailment of spending – the second he’s done in the last three months.
“We are preparing to further slow spending until the Legislature acts to bring the state’s budget into balance,” Baldacci said. “We’re taking prudent action to make sure that state spending does not exceed revenues while we diligently work toward a bipartisan budget.”
The governor has drawn the line in the sand, saying he won’t accept any tax increases to fill the hole. Instead he has proposed a supplemental budget that closes the gap through cuts.
Democratic legislative leaders last week joined their Republican colleagues in taking the governor’s no-tax pledge, at least as far as broad-based taxes on sales and income are concerned.
The problem is both parties disagree with his list of proposed cuts, particularly in health and human services. And, that is slowing things down.
“Time is short, and we must have a plan for slowing state spending in place before April 1,” Baldacci said in a prepared statement. “As we get closer to the end of the year, it becomes much more difficult to make the necessary cuts.”
The fiscal year begins July 1, and Baldacci is required to keep the state’s $6 billion, two-year budget in balance even as state tax collections decline due to the recession. A growing concern is the news will get worse on April 15, when individual income tax payments are due, with some saying the budget gap could grow by another $20 million.
The governor’s first curtailment order, made in mid-December, cut spending for this fiscal year by $38 million and the one he’s contemplating now would cut it by another $27 million.
Curtailments, which immediately stop spending in certain areas, are being used as emergency shut-off valves and will be replaced with a supplemental budget, as soon as it is passed by the Legislature. A budget passed with a two-thirds, bipartisan vote goes into effect immediately, but one passed with a simple majority wouldn’t kick in until 90 days after the mid-April adjournment, or after the start of the fiscal year in July.
The Appropriations Committee worked through the weekend and into the night on Monday to review the governor’s proposal, but by 11 p.m. they were still more than $40 million short. The most controversial cuts were in the Department of Health and Human Services, where Baldacci has proposed a $93 million reduction. Over the weekend the committee approved the governor’s proposed cut of $34 million in state aid to K-12 education, but tabled a $9 million cut to the state’s university and community college system.
House Speaker Glenn Cummings said the painstaking process ultimately would produce results.
“The Appropriations Committee and Democratic leaders have been working day and night, and tremendous bi-partisan progress has been made to balance the budget. The governor takes his responsibilities very seriously, as do we. We are committed to finishing our work on time and by March 31, so that further curtailments will not be necessary,” he said.
“First we’re prioritizing the cuts, then we’re looking for efficiencies and elimination of unproductive programs.”
While Cummings agreed that all broad-based tax hikes are off the table, he wouldn’t rule out smaller tax or fee increases, although he declined to name them. He did say any cigarette tax hike was already earmarked to save the governor’s Dirigo Health insurance program, which runs out of money in February of 2009. Funding for Dirigo is in a separate bill and not part of the supplemental budget.
Rep. Jeremy Fischer, D-Presque Isle, the House chairman of the Appropriations Committee, has been pushing a cut in business tax breaks as a way to find some of the needed cash – a move Cummings supports.
“There are hundreds of millions in business investment programs and tax breaks,” Fischer said, that according to a state study are not monitored to show if they have a good return on investment.
Fischer is recommending that some amount – for example $5 million or $10 million in tax breaks – be shut off for a year to see what impact they have on job creation.
“We’d have an outside agency do an evaluation of business incentive programs,” he said, to see which ones are paying off. “We all want to create jobs, but we know that some of these don’t.” Fischer also supports looking at one-time changes to the Business Equipment Tax Reimbursement program to save money.
Republicans have their eyes on several areas, including eliminating some long-term vacant positions in state government. Money budgeted for those vacant positions is currently used, in part, to cover negotiated raises for state employees. As of the end of January, there were 262 vacant positions worth $12.7 million.
Republicans also have proposed that state employees pick up at least 10 percent of the cost of their insurance premium. Currently the state pays 100 percent. The proposal also would affect legislators, who are covered by the state plan.
Assistant Minority Leader Rep. Robert Crosthwaite, R-Ellsworth, said his party is committed to holding the line on taxes.
“We’ve let the governor know we’re still very much dedicated to doing what he’s challenged us to do, which is to balance this budget without a tax increase,” Crosthwaite said.
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