Chairmen of the Legislature’s 17 standing committees are being asked to come up with 5 percent cuts in all aspects of state government as a first step in eliminating the $447 million that would have to be borrowed to balance the state budget.
With that budget scheduled to go into effect on July 1, time is short.
Senate President Beth Edmonds and Speaker of the House John Richardson on Tuesday asked House and Senate committee chairs to come to the Appropriations Committee by May 31 with recommendations for cutting 5 percent from the state agencies in their jurisdiction.
The Democratic leaders said they wanted to see what it would take to eliminate the borrowing through cuts before they started talking about a plan that would involve tax or fee increases.
Gov. John Baldacci, during a press update on the negotiations over base closures, supported the idea of getting rid of the borrowing in the budget – a plan he discussed with leaders from both parties on Monday.
“I want them to give me an alternative that has no borrowing,” Baldacci said Tuesday. He said the possible closure of the Portsmouth Naval Shipyard and the cutbacks at Brunswick Air Station required the state to review its economic situation.
Democrats are under considerable pressure to get rid of the borrowing. A group of Republicans is leading a petition drive to overturn the borrowing through a people’s veto that would appear on the November ballot. If they collect the needed 50,500 signatures by the end of June, the borrowing in the state budget – due to go into effect on July 1 – would be put on hold.
And, Moody’s downgraded the state’s bond rating Tuesday. While the borrowing wasn’t the key factor, it was mentioned along with the Republican people’s veto petition.
“The balanced budget passed by the Legislature in March is now under attack and we are forced to re-examine it as a result,” said Senate President Edmonds, D-Freeport. “The so-called ‘people’s veto’ campaign is being waged against the budget, and its possible passage will cause significant mayhem at every level of government and in nearly every program.”
The Legislature doesn’t need to find the full $447 million in borrowing to keep the state’s two-year budget in balance. About $200 million was earmarked to pay down the state’s debt on its employee pension fund and to put some money away in a rainy-day account to serve as a hedge against unexpected shortfalls. About $250 million is for operating expenses.
While no one expects the Democrats to support only cuts to achieve the $250 million in savings in the budget, it’s a starting to point to show the public just how bad it could be without tax or fee increases.
“We first want to see what we can achieve through smart cuts of programs that will not have a devastating impact on the elderly, children or the disabled,” said Speaker Richardson, D-Brunswick.
“We want to reduce or eliminate” the borrowing, Richardson said, and do it in time to finish this legislative session by mid-June.
Richardson and Edmonds met with Republican leaders Tuesday afternoon and asked them for a reduction plan.
If they don’t participate, Richardson said, they can’t complain about being left out of the process, “when Democrats lead.”
The ball got rolling on Monday when the chairmen of the Taxation Committee put their work on an all-encompassing tax reform bill on hold and instead started looking for revenue for the governor.
Proposals being floated for new revenue include:
• raising the cigarette tax, with a 50-cent hike equaling $38 million
• raising the sales tax by 1 cent for $150 million
• reducing the BETR reimbursement to 90 percent of the personal property tax for $8 million
Republicans have suggested a series of cuts that would more than add up to the $250 million, but are considered too drastic by many Democrats. They include:
• eliminating 150 vacancies
• using half of the annual $50 to $55 million in the Fund for Healthy Maine to help pay the bills
• putting any Medicaid expansions on hold for savings of $38 million
• tapping $24 million of the remaining Dirigo Health start-up money
• asking state workers to pay $500 per person in out-of-pocket expenses under their health care plans for a savings of $20 million
• redirecting $13 million in racino profits to the general fund
• consolidating some state departments for a savings of $10 million
• reducing state government by 5 percent, with each percentage point worth $38 million, if you don’t include general purpose aid and debt service