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December 16, 2008

Baldacci unveils supplemental budget

By The Mainebiz News Staff

Gov. John Baldacci this afternoon released a supplemental budget to address a $140 million shortfall in revenue for the current fiscal year, which ends June 30, 2009. The proposed budget does not increase any fees or fines, but does draw more than $40 million from the state's reserve accounts and make some "tax changes" to bridge the budget gap.

The supplemental budget continues the governor's Nov. 19 curtailment order, which immediately cut spending by $80 million. Here are the major components of the supplemental budget:

• Eliminate 94 state government positions, including 40 layoffs. According to the governor's office, there have been 729 positions cut from state government since 2002.

• Close one of the two housing units at the Charleston Correctional Facility, which will eliminate 15 local jobs; transfer 22 state prisoners to county facilities; and eliminate the Department of Correction's Office of Advocacy.

• Include $1.6 million in spending reductions put forward by the Legislature.

• Utilize $45 million from the state's reserve accounts. Since 2003, reserves have been rebuilt from $0 to $169 million, according to the governor's office.

Other savings include $1.8 million from the hard hiring freeze implemented by the Baldacci, $6.4 million excess reserves from retiree health, $2 million in reduced capital expenditures, $1 million in reduced debt service and $500,000 in reduced contracts in the Department of Corrections.

The supplemental budget, which is available here, does not raise fees or fines, but it does include some "tax changes" that will net the state some cash, including the postponement of a scheduled decrease in the Telecommunications Personal Property tax, which applies to utility companies. The postponement will raise an estimated $800,000. Another tax change will be that individuals who experience "unusual events," such as a capital gain of $500,000 or more, will be required to make an estimated tax payment in the quarter after the event. The change nets an estimated $5.1 million in tax collections, but does not increase rates or liability, according to the governor's office.

"Every day that goes without action puts more pressure on state resources and makes it harder to balance our budget," Baldacci said in a statement. "The plan I am presenting is responsible, balanced and tough. I urge the Legislature to do its work quickly. We have more difficult challenges ahead."

Maine's Republican leaders responded cautiously to Baldacci's proposed supplemental budget. "At first blush, the package described by the Governor today sounds generally reasonable and balanced, though we do have questions about the impact of the Governor's plan on the ability of Maine's hospitals to continue to provide quality health care across Maine," Senate Republican Leader Kevin Raye and House Republican Leader Josh Tardy said in a statement. "The state is already in arrears to the hospitals to the tune of more than $426 million, so we must closely examine the potential effect of the proposed policy changes that would reduce reimbursement for hospital-based physicians and critical access hospitals."

Baldacci will present the 2010-2011 biennial budget to the Legislature on Jan. 9. The budget must account for a projected revenue decline of $330 million and an additional $508 million in requests to keep state government operating at its current level.

Reader comments

From Frank

The fact that Maine owes its hospitals $426 million is, in itself, unconscienable. The fact that further cuts to physicians and doctors are anticipated really make the state an unsatisfactory environment for the practice of medicine in particular and for future employers and employees in general.  

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