Around the corner

The recession of the early 1990s jolted Maine in ways from which it has yet to recover – ask any school administrator. The job and population losses, the chronic state budget shortages, the wiped-out gains of the 1970s and ’80s were barely anticipated by the state but have become the measures of what to avoid ever since. Don’t look now, says a state revenue report from the Nelson A. Rockefeller Institute Of Government’s fiscal studies program in Albany, N.Y., but states have had the weakest revenue growth since 1993. And this time, the federal government could make matters worse.

The report tracks state revenues as a measure of economic health. It found that between October and December 2000 real tax revenue growth was 1.6 percent, after adjusting for legislated changes and inflation. Maine’s growth was about typical of the nation or a little worse. The changing economy can easily be seen in Maine and several other states’ inability to grow fast enough to meet budget demands. But the numbers in the institute’s report suggest that the local economies may be worse than previously thought.

Here is where the federal government comes in. Many Maine families will not receive a benefit from the Bush administration’s proposed tax cut, according to the Maine Center for Economic Policy, but they will feel its effect. That is because to pay for the cut, some $6 billion annually from the level the Congressional Budget Office estimates is necessary to maintain programs at their current levels will be eliminated.

Rep. Tom Allen, who has supported smaller tax cuts but not the president’s, recently looked at the budget in detail to see where Maine would be affected. He found program cuts in LIHEAP, the fund Maine uses for heating subsidies in the winter, child care block grants, used in the 1990s to help move people off welfare, cuts in law-enforcement programs used by Maine state police and cuts in veterans’ programs, which fell some $11 billion short over 10 years in their ability to maintain buying power.

As a net receiver state from federal tax dollars, Maine can lose a disproportionate amount of federal funding when budgets are cut in Washington. The cuts add up to millions or tens of millions a year in lost funding, requiring Maine to either cut services or spend more at the state level. Given the current shortfall and possible steeper shortages in the next few years, federal cutbacks are going to make balancing state and local budgets measurably harder.