BUDGET PRIORITIES

No one wants to eliminate programs and services, but with a growing state budget shortfall, lawmakers will have no choice but to go down this path. The Legislature’s Appropriations Committee and the Baldacci administration have set up a needed, but no doubt painful, process for doing this work by asking departments and committees to prioritize, based on the needs of the state’s residents, the work they do or oversee. The work will guide decisions on spending reductions.

The Appropriations Committee this week asked other committees to identify ways to reduce spending by $99 million for the 2009 fiscal year. This is on top of cuts already proposed to close a $95 million budget hole in the remainder of the current biennial budget.

The additional cuts are needed because of the expected continuing worsening of the national economy, which means consumers will spend less, thereby decreasing state revenues. Adding to the problem, the Bush administration has moved ahead with rules to cut federal funding for Medicaid services. Although the state’s congressional delegation, along with many others, is trying to delay the Medicaid cuts, the state must prepare for them becoming a reality. The president’s proposed budget for 2009 also would cut federal funding to states in many areas, which already has led members of Congress, both Republican and Democrat, to say they would largely ignore the president’s document in writing their own budget.

Prioritizing state spending – within and across the departments – is long overdue and will lead to important discussions about what programs and services the state can and should realistically provide. Some will be eliminated.

The Department of Administrative and Financial Services has provided each department with target savings as a starting point for this work. While this is helpful, the departments and oversight committees must be much more sophisticated in analyzing what services are essential and which ones can be eliminated to meet budget constraints. Looking at delivering needed services more efficiently is also an option.

Another option is suggesting “revenue raisers” (a less politically charged term for tax or fee increases), but such increases do not negate the need to first identify places to cut. Raising the state’s sales tax by a penny would raise about $150 million a year. But Maine, with among the highest tax burdens as a percentage of income, has little room to maneuver toward higher taxes without first ensuring that it spends the money it already has efficiently and on the highest priority items while letting lower ones go.

As the work of patching the shortfall continues, there will be frequent talk of the state’s spending excesses. Some perspective is helpful. Since 2000, the state’s General Fund appropriations, adjusted for inflation, had increased an average of 1.2 percent. This is hardly runaway spending.

Of the state’s $6.3 billion General Fund budget for the 2008-09 biennium, 48 percent of the money goes toward kindergarten through grade 12 and higher education and 32 percent goes to the Department of Health and Human Services, including MaineCare and mental health services. Another 8 percent pays for law enforcement and public safety, and 2 percent goes to the natural resource agencies. Another 8 percent is left for everything else, including debt service.

Of the General Fund revenue, 87 percent goes back to municipalities in the form of school aid and revenue sharing, to individuals as property tax relief, to health care providers as Medicaid funding and to pay down unfunded liabilities and bonds.

Lawmakers have difficult and painful choices ahead of them. Prioritizing state spending and realizing that the lowest priorities may have to be eliminated is a good start.