SPENDING DECISIONS

The Democratic celebration over the party’s gains in the Maine Legislature will be short-lived, if it ever started. The day after Election Day, Gov. John Baldacci issued an order to cut state spending by $150 million, which is likely to prompt the Legislature to meet in a special session before the year is over. Although the state’s financial shortfalls have more to do with the free-falling national economy than with state spending decisions, this problem will fall squarely at the foot of Democrats, requiring difficult decisions about where to reduce state spending.

Against this backdrop, it is interesting to note that although the “taxes are too high” mantra continues to hold sway – Maine voters resoundingly rejected a tax on beverages on Tuesday – voters elected more Democrats to the Legislature. In the House, Democrats gained six seats for a total of 96 compared to the Republicans’ 54. In the Senate, the Democrats have 20 seats and the Republicans 15, pending the results of any recounts.

Could it be that voters want more than pledges to reduce taxes from their representatives and senators? Perhaps they actually value government services; they just don’t think they should have to pay for them.

In addition to the $150 million spending reduction required in the next eight months, the state is expected to face a $500 million gap between expected revenues and expenses in the next budget cycle, which runs through 2011. To deal with this, lawmakers must decide what state government can afford to be and do.

This work of evaluating programs and services – within and across departments – is long overdue and will lead to important discussions about what work is truly essential and what is important but can’t be paid for with the state’s increasingly limited resources.

Although addressing spending is the first priority, a tax increase should be part of the discussion. Lawmakers may decide that some state services are so necessary that raising taxes to pay for them may be appropriate.

Some perspective is also 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 more than $6 billion General Fund budget, nearly half the money goes toward kindergarten through grade 12 and higher education and a third goes to the Department of Health and Human Services, including MaineCare and mental health services. The remainder pays for everything else, including law enforcement and public safety, natural resource agencies and debt service.

Two more important points: At 10 percent, Maine’s tax burden is only slightly above the national average of 9.7 percent. As a result, Maine’s tax burden is not the highest in the country, as we’ve long heard. It is 15th, according to the Tax Foundation.

Second, the trend in the state’s tax burden is clearly downward, as it should be. In 2005, it was 11 percent; it was 10.3 percent last year. Further, Maine’s per capita average state and local taxes, in actual dollars, have dropped slightly from $3,857 in 2006 to $3,835 in 2008.

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