REVENUE REALITIES

It is not unexpected that Maine’s revenues projections are down. The latest estimate – that revenue will be $95 million lower than anticipated in the next two years – means, however, that lawmakers must look at the state’s budget in a new way. Trimming here and there at a time when revenues are expected to remain depressed won’t be sufficient to balance the state budget. Likewise, reorganizing state government will help reduce costs but won’t solve the larger problem. In the end, lawmakers must cut funding for programs and services, each of which are likely to have vocal supporters.

The Legislature’s Appropriations Committee has spent the fall looking for $10 million in savings to plug an earlier budget hole. It can now build on that work by prioritizing areas of the budget.

Committee members from both parties say a lack of political will, not places to cut the budget, kept the appropriators from booking even more savings in anticipation of this month’s revenue projections. When the committee meets again next month, expect to hear a lot about consolidating state departments and delivering state services more efficiently.

While both are positive, these areas aren’t likely to yield enough savings to solve the state’s budget problems. Raising the state’s sales tax by a penny would raise more than $150 million. But, at a time when the state can’t study the possibility of using tolls to raise money to pay for roads, tax increases don’t have much support. Further, Maine, with among the highest tax burdens around, has little room to maneuver toward higher taxes.

With a strong distaste for raising taxes and flat or declining revenue, lawmakers will soon find they have no choice but to cut programs and services to save money. There are harsh realities here as well. Education and health and human services account for about 80 percent of the state budget. Cuts to K-12 spending are likely off the table because of the resistance to the governor’s school consolidation plan – for which $36 million in savings has already been counted in the budget. Likewise, the state has already booked savings for changes in the Department of Health and Human Services and further cuts here will hit groups that can least afford it.

There is positive news. Maine has made progress this decade. Since 2000 its General Fund spending increases have been among the lowest nationally. A recent study from the Center on Budget and Policy Priorities found that Maine’s General Fund spending, as a percentage of personal income, has fallen from 7.2 percent in 2000 to 6.8 percent in its 2008 budget. Those percentages ranked Maine ninth highest in 2000 and 12th highest today.

But if Maine is going to drop below the dreaded lists for states with high state and local tax burdens while still providing necessary services that attract business development, it must change the way it operates government at all levels.

The states’ well-placed determination to lower tax burdens means that money always will be scarce while demands remain. Prioritizing those demands in light of available funds is a difficult but necessary job.