King set to reduce current budget State agencies freeze hiring, reserve funds

AUGUSTA – Responding to tax revenue declines over the last 90 days, Gov. Angus S. King issued an executive order Friday imposing a number of cost-cutting measures to shave $10.35 million from the current state budget.

As a result of the governor’s decision, all state departments and agencies will be asked to freeze reserve funds available for the current fiscal year, as well as any balances that were carried over from the fiscal year that ended June 30. A hiring freeze is now in effect until June 30, 2002. Open positions currently unfilled will remain vacant and vacancies that occur over the next nine months will be considered for rehiring on a case-by-case basis.

All departments and agencies are being asked to achieve reductions equal to 2 percent of their aggregate budgets in the current fiscal year. Departments with oversight of grants to public and private organizations are also being asked to make 2 percent cuts where appropriate.

State grants for local education, debt service for the University of Maine, and the state retirement system are exempted from the order. A small number of state grants, however, will still be affected by the 2 percent edict. For instance, the University of Maine will lose an estimated $2.6 million for such things as research and the Maine Technical College System will lose about $608,000.

Equipment purchases are also frozen under the order unless they can be justified as an emergency capital expense.

Although the governor was making the rounds Friday afternoon in the Aroostook County community of Easton, Janet E. Waldron, commissioner of the Department of Administrative and Financial Services, and Jack Nicholas, state budget director, briefed reporters during a late afternoon meeting. Earlier this week, Waldron told lawmakers on the Legislature’s Appropriations Committee that state revenues were $34 million below what had been projected through Sept. 30 – the result of a slowing state economy that took a sharp downturn after the Sept. 11 terrorist attacks.

In the period covering July 1 through Sept. 30, sales tax revenues were down by $12.2 million; personal income tax revenues were under projections by $14 million and corporate income taxes declined by $3.7 million. Estate taxes through September failed to meet the forecast projection by about $4 million.

The Maine State Revenue Forecasting Committee is scheduled to re-evaluate the state’s economic outlook at the end of November. Pending the results of that report, the governor has said harsher measures could be in order. He did not rule out the possibility of deeper across-the-board cuts to state agencies and programs.

Still available for short-term economic relief are contingency reserves set aside by the governor and the Legislature. About $21 million could be tapped from the state revenue reserve account and another $106 million could be drawn from the Rainy Day Fund if necessary.

“I think we will watch the state revenues,” Waldron said of the months ahead. “We’ll watch the economy very closely and we will certainly continue to sit down as we are and work with legislative leadership, looking at where we want to go from here and what the next steps might be.”