Address budget shortfall

Serving on the Appropriations Committee is one of the highlights of my legislative career, but it also represents a challenge. Balancing the many demands of state government is difficult at any time, and becomes more so when revenues fail to meet expectations. The current budget shortfall, which is likely to exceed $200 million, requires an energetic response from the Appropriations Committee and the full Legislature.

Maine is hardly alone in facing these fiscal problems. More than 40 other states are experiencing similar budget gaps and many of those exceed 10 percent of the state’s budget. Maine’s revenues for the current two-year budget will likely be down about 8 percent from original estimates. Our problems are real, but they are manageable and are not as severe as those faced by many other states. They are also nowhere near as severe as Maine faced in the early 1990s.

Many people, from candidates for public office, to concerned citizens, to some columnists, have expressed concern over the size of Maine’s budget gap and what they deem as the lack of any action to address it. They are correct to be concerned about the budget, but state government is responding appropriately. In fact, the state is responding to this year’s budget problems in the same manner it responded last year when the events of Sept. 11 and the recession forced a reduction in revenue estimates.

Last year, it was clear by late September that there would be a negative impact on state revenues, but no one called for an immediate emergency session of the Legislature. Instead, we quickly moved forward with a responsible process to handle the shortfall. That process included the following steps:

1. A reduction in state spending by Order of the Governor;

2. Meetings of the Consensus Economic Forecasting Commission (CEFC) and the Revenue Forecasting Committee (RFC) to provide updated revenue figures;

3. The preparation and submission of a supplemental budget by the governor; and,

4. Review of the budget by the Appropriations Committee, policy committees, and then the full Legislature.

This process was followed last year for what was initially deemed a $250 million revenue shortfall. A balanced budget was developed and adopted in early April.

Unfortunately, it was clear by the end of April that revenues, in particular income tax paid on capital gains, were significantly below projections. Initial estimates were for a $180 million shortfall.

The response of the governor and much of the Legislature was similar to last year. Gov. King has already issued orders reducing spending by more than $75 million. The Consensus Economic Forecasting Commission met in July and the Revenue Forecasting Committee will issue a new revenue forecast on Aug. 28. After that, Gov. King is expected to present a supplemental budget.

The Appropriations Committee will then immediately convene, in conjunction with the policy committees, to review the budget, hold public hearings, and develop a solution agreeable to the full Legislature. When our Committee has completed its work and the full Legislature has received it, the Legislature will convene in special session. We will then adopt a supplemental budget that addresses the shortfall, just as we did earlier this year.

As a member of the Appropriations Committee, I am committed to addressing the current budget shortfall in an expeditious and responsible manner. We have established a process to do that. Addressing this shortfall will require difficult decisions, but I know the Legislature is committed to confronting the deficit and making those choices.

State Sen. Mary Cathcart is a Democrat from Orono.