STRUCTURAL BUDGET HOLE

New, slightly lower revenue projections for Maine couldn’t have come at a better time because the projections, reducing the amount of money available by $74 million over three budget years, are not so low to decimate the budget but demonstrate beyond doubt that spending must come down. Lawmakers should see not a temporary revenue decline but a long-term warning about the state’s spending habits.

State Sen. Peter Mills, R-Cornville, recently outlined the extent of this problem in a piece appropriately titled “Mud Season.” He reminded fellow Republicans of four reasons Maine now finds itself in its current predicament.

Human services, which between 1963 and 2006, he says, grew at 22 times the rate of inflation. Schools: “K-12 education is 5 percent of our gross state product and growing faster than inflation despite diminishing attendance.” Debt, as with businesses, the cost of health care for pensioners and for their retirements has added $4.7 billion and $3 billion respectively to what the state owes. Highways, which, Sen. Mills argues, Maine built in abundance when gravel and asphalt were cheap but now cannot afford to maintain.

The schools portion of these observations were apparent in the administration’s decision to cut General Purpose Aid to Education by $17 million in ’08, with about $3.5 million of that going to consolidation efforts. This is a clear, worrisome signal to schools that the state has concluded it cannot reach or sustain its target of 55 percent funding of GPA under the current infrastructure of local districts. If the state is to make 55 percent, it must be of a smaller total.

Maine lawmakers are moving in that direction now even as schools struggle to stay within the GPA guidelines. The proposed cut in the budget for ’08, coupled with the question of whether taxpayers are fully seeing local tax relief as the state spends more for schools overall, will provoke an instructive conflict in Augusta: Can legislators find substantial efficiencies in the face of pressure not to upset the status quo?

This is important not only for schools but for an even faster growing budget line, Medicaid, with defenders every bit as active as school administration advocates. The governor is moving the state toward Medicaid managed cared, but the problems go deeper than that; Maine spends billions of dollars, two-thirds of it federal, on health care but has only an approximate idea what it is buying.

This debate will open as a bill by state Sen. Phil Bartlett, D-Gorham, probes hospital costs and tries to limit the rate of increase. Whatever that bill looks like if it eventually passes, if legislators can’t trim school costs, they can’t trim hospital costs.

The administration proposes to close this year’s portion of the budget shortfall with unexpended balances and other one-time sources of revenue. That may balance the budget short-term, but the longer-term answers require more substantial change in education and health care. And that’s before the state gets to paying off its retirement system debt and solving its highway problem.