AUGUSTA – Even before the national financial crisis, things were looking bleak in Maine because of the slowing housing market, job losses and record-high oil prices, Gov. John Baldacci said in his weekly radio address Saturday.

Now, Baldacci said, the financial crisis has crippled the credit market and driven Wall Street and Washington into spasms of panic and uncertainty.

“Here’s what we know. Maine is not immune from a stumbling national economy. We’re not officially in a recession, but it certainly feels like it,” Baldacci said.

State government faces a projected budget gap of more than $500 million for the next two-year budget cycle beginning July 1, 2009, unless spending is brought in line with revenues, said Baldacci.

The heads of state departments recently submitted plans for current services to show that their projected costs for the next two years are going to be about $508 million higher than revenues, he said.

In anticipation of tough times ahead, Baldacci said he has ordered every department in state government to prepare for a 10 percent reduction in spending.

But it’s the economic downturn, not “outlandish state spending,” that accounts for most of the budget gap, Baldacci said.

If Maine had not held the line on spending during the past six years, the situation today would be much worse, he added. Revenue estimates will be updated in the weeks ahead.

In their response to the governor’s weekly address, legislative Republicans focused on the people’s veto question on the Nov. 4 ballot, which asks voters to prevent tax increases on beer, wine, soda and paid insurance claims from taking place.

House Minority Leader Josh Tardy of Newport said the tax increases are to prop up the Dirigo Health program, which he labels a failure.

Tardy contends that when Dirigo was created by law in 2003, legislators were assured that no taxes would be needed to sustain it. He also rejects claims by people’s veto opponents that a vote against the taxes will kill Dirigo.

“This tax is a bad deal for the people of Maine on all levels,” Tardy said. “Make no mistake – this is a rebellion against Augusta’s ruling elites and it is high time that the taxpayers of Maine stood their ground.”