The Calm Before the Storm

Sunday, May 17, 2009

Today, I was able to take my sons for a paddle up the Kennebec to buy dinner at the Old Goat, and ice cream at the Dairy Treat.  It is good to know life's little pleasures can continue in these tough, recessionary times.  Tomorrow, we are back to some of the toughest budget negotiations in recent memory -- often going until 2 am in the last several days.

Just as a couple can suddenly fall apart when money gets tight, so we now find a highly bipartisan session beginning to deteriorate over how best to cut over 13% of our upcoming state budget.  There are few good options, and without a bipartisan, 2/3 majority in both House and Senate by June 30, we accept another state government shutdown such as we had in the early 90s.

Thanks, but no thanks.

The stark facts are these.  State tax revenues have plummeted nationwide, due to reduced incomes and big-ticket sales.  In our overall budget adjustments to the end of FY 2009, as well as FY 2010 and 2011, we must address a shortfall of about $1.1 billion here in Maine.  Compared to other states, Maine is roughly in the middle of the pack.  Fortunately, our shortfall of 13% for fiscal year 2010 is mild compared to Alaska’s of as much as 30%, New York’s, at 31.9%, or Nevada’s at as much as 32%.

Still, cutting our overall budget for the next year by 13% is no small matter.  And 2011 looks even worse.

Federal stimulus dollars are helping significantly in 2010, especially in the schools, but are nowhere near enough to mitigate the overall impact.  Unlike the federal government, Maine must completely balance each year’s budget. 

Because over 80% of Maine’s general fund budget is spent on education and human services, these areas will unavoidably be included in cuts.  State employees, likewise, will feel significant pain.  Because both Republicans and Democrats must - and will - vote in favor of this difficult budget.  Because so many Mainers are strongly against raising taxes, solutions such as an additional penny on the sales tax are simply not viable.

Much of the problem is due to the State’s reliance on volatile sources of revenue.  Income taxes, and taxes on new cars and new building product sales, make up most of our revenue.  Unlike towns, we cannot depend on a relatively stable revenue source like the property tax.  As a result, state government is less able to serve its citizens when times are tough, and public jobs are most needed.  To address this problem, Maine must finally broaden the base of its sales tax to include more stable and countercyclical items, as recommended for decades by countless experts. 

This is one major reason I am working hard to help pass L.D. 1495, a comprehensive tax reform bill that will allow us to begin stabilizing state revenues, and help reduce the likelihood that state employees’ jobs and compensation will continue to be on the chopping block from one year to the next.  By broadening the sales tax base and using that revenue to reduce income taxes, Mainers can share our tax burden more fairly with our out-of-state visitors, can pay over $57M less in taxes ourselves, and can better protect state employees down the road.

As the budget talks continue to evolve this week and next, I will continue to advocate for rational solutions for our state employees, children’s mental health providers, adult education, schools, roads, and other critical services in this time of economic need.  Clearly, shared sacrifice will be needed to bring Maine forward to a better day.

Hearing from you, my constituents, helps me fight for the needs and concerns of my district, for Maine’s most vulnerable populations, and for our future economic revitalization.  Please stay in touch.

Best,

Additional information on State Budget Crises: 


Interactive Map of State Budget Emergencies
Note:  Click on "highest estimate" FY 2010 for most accurate sense of budget crisis.  Some states have passed budgets or are still awaiting new, official shortfall projections. 

A few sample headlines on these issues:

March 2009:  NY Governor announces 8,900 layoffs of state employees

May 2009:  California lays off 5,000 employees, a move designed to cut the general work force by 5 percent

May 2009:  Washington State layoffs to trigger 7,000-8,000 government-related layoffs, including public schools, universities and state offices

May 2009:  Wisconsin to lay off over 1,100 state workers, require 16 unpaid days off, cut aid to local schools

Additional information on L.D. 1088, Maine's tax reform proposal:

http://www.mainetaxreform.org/

Highlights of the FY08-FY09 Biennial State Budget

The $6.3 Billion two-year budget will fund state operations beginning on July 1, 2007 through June 30, 2009. The FY08-FY09 was passed with strong bipartisan support in the House and Senate, easily exceeding the two-thirds requirement. The budget was balanced without raising taxes and remains under the spending cap. 

It is important to note that most increases within the budget go to K-12 education.  This means local voters can now use this money either to reduce local property taxes, or to improve local schools.  These limited increases also help offset skyrocketing health insurance and energy prices, which impact government services even more than most other sectors of the economy.

This budget upholds our Maine values and:

Ø      Promotes long-term fiscal stability by streamlining government overhead while maintaining services

Ø      Ensures opportunity through a quality education

Ø      Protects our public's health and shared quality of life

Promoting Long-term Fiscal Stability:

Controlling spending, increasing accountability, and streamlining government systems.

This Budget:

Ø      Controls spending by flat funding nearly 25 state agencies.

Ø      Cuts funding for the Legislative budget by $1.35 million.

Ø      Establishes a commission to find greater efficiencies in state government and in state contracts.

Ø      Increases enforcement for tax evaders to ensure that everyone pays their fair share.

Ø      Controls spending in MaineCare by the adoption of managed care, clinical care management and standardization of rates.

Ø      Increases enforcement of “Third Party Liability” to ensure that private insurance pays before MainCare.

Ø      Supports the “PHIP” program to ensure that more people receive employer based rather than MaineCare, where this is cost effective.

Ø      Takes steps to replace the MeCMS computer system for the MaineCare program with a fiscal agent.

Ø      Reorganizes Maine’s school administrative units to cut unnecessary spending and improve classroom results.

Ø      Requires the Department of Corrections to create a sustainable plan for Maine’s prisons system.

Ø      Consolidates all information technology purchases and maintenance.

Ø      Reorganizes the Department of Health and Human Services and the Department of Education to improve efficiency.

Investing in Maine’s Future: Ensuring opportunity through a high quality education and investing in Maine’s small businesses.

This Budget:

Ø      Meets Mainer’s highest priorities by providing an additional $256 million for K-12 education and will reach 55 percent of statewide education funding by FY09.

Ø      Increases Higher Education funding in order to allow 500 students to enroll in the Community College

Ø      System and reduce the tuition rate increase at the University of Maine System to less than 10 percent.

Ø      Invests in the Maine Economic Improvement Fund, affiliate with the University System.

Ø      Accepts the Center for Deaf and Hard of Hearing, as part of GPA

Ø      Accepted a reorganization of the Department of Education

Ø      Provided additional funding for the Maine Downtown Centers, Small Business Development Centers, and Pine Tree Zone Expansions.

Ø      Invests $4 million in the Maine Technology Institute to target cluster development.

Ø      The budget enacted by the legislature also rejected several changes in school funding put forward by the Governor:

o       Rejected a proposal to increase Student to teacher ratio

o       Rejected a proposal to expand laptops in high schools

o       Rejected proposal to cut extra and co-curricular activities

Protecting the Health and Safety of Maine People: Maintaining a strong social safety net and improving health of Maine people.

This Budget:

Ø      Addresses critical needs for Maine’s long-term care, home based care and nursing homes.

Ø      Increases funding for domestic violence prevention efforts.

Ø      Increases funding for school based healthcare and school breakfast programs.

Ø      Rejects further cuts to the “Non-Cats” population in MaineCare – Preserving health insurance coverage for 19,300 of Maine’s poorest residents.

Ø      Rejects a proposal for co-pays and premiums in MaineCare, that would have effectively denied coverage

Ø      Rejects a proposal to take $20M out of State Employee Health Care.

Ø      Approves funding for the low-cost drugs for the elderly program [DEL].

Ø      Rejects proposals to raid the Fund for a Healthy Maine

Ø      Accepted a proposal to institute a new clinical management program to ensure that clients are following preventative health measures by monitoring treatments.

For an editorial commentary on the budget, please visit http://bangordailynews.com/news/t/viewpoints.aspx?articleid=150737&zoneid=34