Here We Go, Budget Cuts Are The Norm...

Governor Baldacci Presents Plan to Close $569 Million Budget Gap

May 1, 2009

Plan Calls for Shared Sacrifice While Protecting Economy and State’s Most Vulnerable

AUGUSTA – Governor John E. Baldacci today released the details of his plan to close a $569 million budget gap created by declining revenues.

“The global recession continues to have a sharp impact on Maine,” Governor Baldacci said. “The plan I’m presenting includes many difficult decisions. It requires shared sacrifice across the State. But I also believe the plan is reasonable and fair.”

The plan closes a $129 million budget gap for the current fiscal year, which ends June 30, and a $440 million gap in fiscal years 2010-11.

In January, Governor Baldacci presented a budget plan that reduced General Fund spending for the two-year budget from $6.3 billion in 2008-09 to $6.1 billion for 2010-11.

With the current proposed revisions, the General Fund budget will be reduced to $5.8 billion.

“As our State works its way through the worst recession since the Great Depression, it’s important that we all remain focused on our shared objectives – to protect and grow our economy, and protect our most vulnerable neighbors,” Governor Baldacci said.

Reductions touch all areas of State government, including:

• Increased health insurance cost sharing for new State employees;

• Elimination of planned merit increases;

• 12 government shutdown days per year in 2010 and 2011

• Creation of a Commission to Recommend Streamlining of State Programs and Services.

The plan also reduces funding for:

• K-12 and higher education;

• The Department of Health and Human Services;

• The Homestead Exemption program;

• The Circuit Breaker program;

• Municipal Revenue Sharing; and

• The Milk Subsidy, by capping the amount available.

In addition, the plan relies upon $75.5 million from the Budget Stabilization Fund in 2009 and 2010 and $40.6 million from the State’s Working Capital Fund. Taken together, the two funds represent the State’s reserves.

The plan also redirects American Recovery and Reinvestment Act resources originally proposed for other uses. Initiatives to expand health insurance coverage for laid-off workers and to invest in Health Info Net will be eliminated.

“The Recovery Act has given us a great opportunity to put people to work in Maine. Already, we’re seeing construction crews on the job,” Governor Baldacci said. “The federal support will also help us avoid unbearably deep cuts in the services that State government provides, including public safety, health care and education. Things are diffficult, but they would have been much worse. Jobs have been saved and vital services have been protected. There are no additional layoffs in this proposal.”

The budget plan maintains support for a pilot program to change the delivery of primary care to make it more patient-centered, medical scholarships and the Graduate School of Biomedical Sciences, as proposed in the Governor’s original plan for Recovery Act investments. In addition, the proposal invests $2 million to fund the construction of an Educare pilot project in Waterville. The investment is matched by more than $6 million in private dollars to build this innovative center.

“Even during bad economic times, we must continue to invest for the future. These modest programs will have a lasting and outsized positive impact for our State,” Governor Baldacci said.

Additionally, the plan makes adjustments to the tax code, including increased enforcement, a tax amnesty program, a freeze of indexing for individual income tax brackets and the standard deduction. Maine’s standard deduction and individual income tax brackets will remain unchanged from current law.

“This budget makes serious and difficult reductions, and continues efforts to streamline and reduce the size of State government,” Governor Baldacci said. “We face unprecedented economic times, and I am proposing ideas that we would all like to avoid. But if we make the tough decisions today, we will be better prepared for recovery when it comes.”

For more information, visit the Governor's finance page at http://www.maine.gov/governor/baldacci/policy/finances.html