SPENDING CONTROL

The emphasis in solving the state’s current budget problems has been to find ways to cut ongoing costs to shrink expected future shortfalls. Gov. John Baldacci moved the state in this direction Tuesday with an executive order that will shrink, and in many cases, stop state payments across the budget. The question for lawmakers, who will begin deliberations on the budget when they return to Augusta next month, is whether the needed savings should all come from cuts and whether the reductions are in the right areas.

Like many other states around the country, Maine faces a growing revenue shortfall, necessitating cuts in programs and services. The governor, through a curtailment order, initiated cuts that would save $38 million in the current fiscal year, which ends in June. The curtailment order remains in effect until lawmakers pass a supplemental budget.

This, and the fact the governor’s budget proposal is expected to reflect the curtailment order, puts pressure on lawmakers to prioritize state spending, not only to close the current gap, but to reduce state expenditures going forward so they are more in line with state revenues. The funding gap through 2009 is predicted to be $95 million, although many expect it to get worse.

At the same time, the order allows the state to begin saving money now. Without it, cuts would not be made until the Legislature finishes the supplemental budget, which likely wouldn’t be until late spring. In this case, the $38 million would have to be cut from only a few months’ worth of state spending. The order gives lawmakers time to do the prioritization work, an approach both Republican and Democratic leaders praised.

Because they represent the largest share of the state budget, education and human services will see the largest reductions in state spending, about $20 million and $13 million respectively. The difficulty for the Department of Education will be to cut spending without decreasing General Purpose Aid payments to school districts. Such a decrease would further erode support for the governor’s school consolidation initiative, which is necessary to further reduce school administrative costs and to balance the state budget.

In the Department of Health and Human Services, the emphasis was on maintaining statewide core services. That means waiting lists will grow and some will go without services beyond those that ensure their health and safety.

“This is what smaller government looks like,” said DHHS Commissioner Brenda Harvey. By keeping track of unmet needs, the department can help lawmakers decide if this is the smaller government they support.

With a strong distaste for raising taxes – the state has one of the highest tax burdens in the country – and flat or declining revenue, lawmakers have little room to maneuver.

A report from the National Conference of State Legislatures this week warned that many states’ rainy day funds are too small. The center recommends a rainy day fund of 15 percent of state spending. Maine’s reserves are about 5 percent of state spending, leaving a small pool to tap if economic conditions worsen.

By trimming spending now, the governor better positions the state to prepare for worsening economic times.