STORMY ECONOMIC FORECAST

The report Monday from the state’s Revenue Forecasting Committee confirmed what had long been feared: State revenue collections are expected to continue to lag through 2009. This reinforces the need for lawmakers to address the state’s budget shortfall – now roughly $200 million – as a long-term problem, not something to be fixed by raiding funds or “cutting the fat.”

Based on the expected continuation of a slowdown of the national economy, the forecasting group projected that revenue collections in Maine will be $95 million lower than previously expected through 2009. This is on top of an already known $95 million gap, more than a third of which must be plugged in the next four months.

The first task, which lawmakers have already begun, is to prioritize state spending. This work of evaluating programs and services – within and across the departments – is long overdue and will lead to important discussions about what programs and services the state can realistically provide with the funds it has. Through this work, lawmakers should decide what work is truly essential and what is important but can’t be paid for with the state’s increasingly limited resources. Some programs and services will be pared back. Some will be eliminated.

Gov. John Baldacci continues to set the right tone by emphasizing reduced state spending before turning to tax increases or taking money from the state’s Rainy Day Fund. “I believe we must first have a comprehensive discussion about spending and our priorities as a state,” he said Monday. “We must be cautious about adding to the burden that Maine people and businesses must carry.”

Caution is appropriate, as is addressing spending first. Taking tax increases off the table would not be. As with prioritizing spending, lawmakers may decide that some state services are so necessary that raising taxes to pay for them may be appropriate.

As for the state’s reserve accounts, estimated to be about $160 million, tapping this money could plug the short-term budget gap but this does not address the ongoing problem of spending exceeding revenues.

A recent report from the State Planning Office on the effects of LD 1, a citizen referendum requiring the state to pay 55 percent of local education costs to reduce the tax burden, highlights one area for closer examination as lawmakers look for places to cut spending.

In addition to requiring the state to pay a larger share of school costs, the measure also set spending limits for state, municipal and county governments. While the state and the majority of municipalities and counties were under their limits, 82 percent of school units exceeded their caps by a total of $132 million. The percentage of school units exceeding the caps has increased each year since LD 1 went into effect.

This shows that requiring efficiency in education, as the governor’s school administration consolidation plan aims to do, is necessary. Even this work, however, remains controversial and a bill to make consolidation easier has been watered down by lawmakers to allow some inefficient arrangements to continue.

Maine’s economic situation means difficult and unpopular decisions will have to be made. Those decisions must be made after close scrutiny of all state spending and with the realization that the lowest spending priorities are likely to be cut.