AUGUSTA – The governor’s plan to close an anticipated $73 million gap in the state budget was blasted Friday by the Maine Hospital Association whose members will lose millions of dollars as a result of the financial revision.

“(The administration is) going to leave us to take care of people and make us wait to receive payment five to six years from the time we provide the services,” said Mary Mayhew, of the Maine Hospital Association. “This is absolutely contrary to all of the promises that were made in the budget when we were told the system would be fixed and the hospitals would be paid what they need to be paid.”

Total changes in Gov. John E. Baldacci’s so-called Part 2 budget call for about $5.3 million in additional new state spending. It also contains $73 million in cuts to offset the $73 million shortfall created by the recalculation of the state’s federal share to fund Medicaid, known in Maine as the MaineCare program. Maine incomes have risen in recent years, prompting the federal government to reduce its level of Medicaid funding.

Meeting with reporters Friday afternoon, the governor and his chief financial officer, Rebecca Wyke, outlined the package which formally will be presented to the Legislature’s Appropriations Committee next week. Both said the Part 2 budget would erase the Medicaid deficit by generating:

* About $19 million in savings by making changes to the state’s Medicaid drug program;

* An additional $12.3 million in revenue by expanding the service provider tax to those caring for the mentally retarded. The tax would be reimbursed at the federal level through a process referred to in state government as “tax and match.”

What really upset Mayhew and her clients, however, was the administration’s plans to reallocate $95 million out of the state’s $5.7 billion, Part 1 budget that was approved in March by majority Democrats and the governor. The money had been set aside to cover the state’s share of Medicaid reimbursement to hospitals and would be used to:

* Cover $29 million of the $73 million Medicaid deficit;

* Pay $36 million toward a $108 million settlement to 12 hospitals owed money since 1993;

* Pay certain current hospital settlements of $5 million;

* Pay prospective interim hospital payments of $25 million.

“(The administration) is now absolutely backing away from the promises that were made to us,” Mayhew said.

Baldacci described the current hospital payment system as “complex and burdensome,” which he said failed to adequately “incentivize quality.” He added his administration had at least made a stand to correct years of underpayments to hospitals.

“We had over 13 years of debt built up to the hospitals, not reimbursing them through two different administrations,” Baldacci said. “That’s been resolved. I’ve sent a letter to the Maine Hospital Association (regarding the Part 2 cuts) and I want to work with them to try to prioritize those resources in a fashion that works for the hospitals. We are going to meet our commitment, but we’re not going to be able to do it as soon because we had to meet these historic settlements.”

The Part 2 budget also extends a number of initiatives introduced in the Part 1 budget to raise an additional $6.3 million, including increasing minimum fines for conviction of marijuana possession from $200 to $400 and maximum fines from $400 to $600. Fines for conviction of possession of drug paraphernalia would increase from $200 to $300. The increased fines are expected to generate about $1.1 million in new revenue, but will not cover all of the losses experienced by the Maine Drug Enforcement Administration as the result of federal cutbacks.

The administration will use the new revenue and savings to provide:

* $800,000 to continue funding four juvenile drug court judges;

* $1.1 million for drug enforcement agents and related services;

* $350,000 to continue grant programs at Pine Tree Legal Association;

* $1.4 million to replace an inadequate statewide public safety radio network;

* $215,000 for increased staffing at the state Bureau of Identification to eliminate a backlog in background identification checks;

* $150,000 for Homeland Security civil rights training for law enforcement officials;

* $915,000 to implement racino oversight early and cover the temporary Bangor facility at the former Miller’s Restaurant.

Republicans, Democrats and the administration agreed Friday the Part 2 budget would allow an opportunity for all parties to work together and find a possible alternative for a current provision in the budget that permits the state to obtain a loan of up to $450 million. Republicans are supporting efforts to overturn that provision of the budget at the ballot box, but would be willing to reconsider their support if differences are resolved at the State House. The administration is keeping an open mind on the issue.

“We’re willing (to revisit Part 1), providing we can get both sides of the aisle to come together and have serious conversations about how we might look at the different pieces that are of concern,” Wyke said.