AUGUSTA — Democratic legislators searching for ways to solve state budget problems are focusing on the Department of Economic and Community Development.

Democratic leaders will move this week to abolish, restructure or shrink the state agency, which they say has never lived up to expectations.

“Everything they’ve done could have been done by existing agencies, reducing administrative costs. In hard economic times we have to concentrate our resources on direct services,” Senate President Charles Pray, D-Millinocket.

Critics say the department is bloated with highly paid administrators, is authoritarian in dealing with agencies that administer its programs and is remote from the small businesses that form the backbone of the state’s economy.

Gov. John R. McKernan and some local economic-development agencies defend the department, saying it has helped spur economic growth and is bringing long-needed accountability to development programs.

Following recent disclosures that the department had released erroneous statistics in a report about business growth, lawmakers interested in reorganizing or eliminating the agency considered taking action.

Democratic Senate staffers have prepared reports detailing how $6 million can be saved by dismantling the department, eliminating the jobs of the commissioner and five deputy commissioners and assigning key functions to other state agencies.

The Legislature’s Housing and Economic Development Committee, which has completed its first comprehensive review of the new department since the agency was created three years ago, plans to meet Tuesday to develop recommendations that would leave the department as a Cabinet-level agency but severely reduce its staff and budget.

The committee co-chairman, Rep. Gregory G. Nadeau, D-Lewiston, a member of the task force that proposed creation of the department, said it has too many top-level managers, provides inadequate hands-on involvement with business and lacks significant support from the business community.

He said there should be “a significant improvement in a short period of time” in the way the department is managed or Commissioner Lynn Wachtel “should look elsewhere.”

Lawmakers already have given tentative approval to a bill that would cancel the department’s contract with the Maine World Trade Association and develop a new arrangement between the Legislature and the trade group, which helps businesses sell their products in international markets.

Legislators also are considering adopting a direct contractual arrangement with the University of Southern Maine, which administers the Small Business Development Center under a contract with the Department of Economic and Community Development.

Since its creation three years ago, the agency has gained jurisdiction over growth management, community development, international marketing and tourism. The administration says that while the number of employees rose from 22 to 95, 65 of them were related to new responsibilities.