Posted on November 16, 2009 in News
By Dan MacLeod
The State of Maine can’t seem to figure out how much money it doesn’t have.
Last month, Governor John Baldacci announced the state was facing a $200 million deficit due to lower than expected tax revenues. But the most recent estimates point to a $300 to $400 million shortfall in the current two year budget. The total amount of tax revenue generated in October was nearly $27 million below expectations, leading lawmakers and analysts to believe the recession has hit Mainers harder than expected.
Higher education — which has already sustained significant curtailment over the last two years — will most likely endure another round of cuts.
“Oh yes, no doubt about it. There will be reductions to public universities, to public K-12, really every category of state spending,” said Richard Rosen, R-Bucksport, a member of the Appropriations and Financial Affairs committee. “The governor has said he does not support or propose any tax increases, he added. “I’m sure he’ll propose some fee increases, but no income or sales tax increases. It will have to be accomplished through cuts.”
Last month, Baldacci asked UMS Chancellor Richard Pattenaude to cut $15 million over the next two years from the University of Maine System’s budget. USM’s share of that is around $1.75 million a year.
Although UMS set aside federal stimulus money to offset additional cuts from the state, USM President Selma Botman said that money can only be used over the next two years. The third year’s disbursement has been reserved for a “strategic investment fund,” to develop new programs that administrators hope will attract new students.
The UMS Board of Trustees is expected on Monday to vote on sweeping changes to Maine’s seven-campus university system proposed by Pattenaude in his “New Challenges New Directions” plan. The final report of the plan was released in September, and calls for centralizing UMS services to offset a projected four-year structural deficit of $42.8 million.
The most recent estimates will be finalized when the State of Maine Revenue Forecasters meet on Nov. 20, Rosen said. In the meantime, Baldacci is putting together an emergency curtailment order to stop state spending. The curtailment order will not account for the entire budget gap, but it may help to offset it.
“The governor has very little authority to change spending when the legislature isn’t in session,” Rosen said. When the legislature reconvenes in January, lawmakers will hold public hearings on the budget.
“The short term, we have to fulfill our constitutional requirement to have a balanced budget. We have to bring this year and the next year into balance,” he said. “In the long run, I think it’s going to be making some decisions about maybe the complete elimination of certain categories of spending or certain types of programs, or changes in the overhead cost of operating state government, because the forecasters are telling us this is going to be a fairly long-term situation and that we’re not going to see employment go back up to pre-recession levels until about 2013.”
Forecasters have been wrong so often because nobody expected the recession to hit Maine so hard, he said.
“In the Spring of 2009, they thought they would see a decline of about two percent. Instead it ended up actually being 17 percent,” Rosen said. “Last forecast they gave us was in April and that forecast said we were gonna be down about $400 million. We built the budget around that. That forecast didn’t hold for 30 days.”
Charlie Colgan, a professor at the Muskie School and economic forecaster for the state, said the amount of time it takes to get the data impedes the accuracy of projections. The Economic Forecasting Committee got the data on the first quarter of 2009 from the U.S. Bureau of Economic Analysis only three weeks ago.
“The changes have been a lot larger than anything that we’ve got in recent history so it’s hard to find a precedent for it,” said Colgan. While all recessions make forecasting difficult, the depth of the current slump has kept forecasters guessing.
“It’s always hard. This one is harder because the drops in the economy were so steep relative to anything since WWII.”
Colgan noted that the estimated $300-400 million state deficit isn’t strictly a measure of the economy. It also includes things like shortfalls in funding for the state pensions system and the availabilty of stimulus money.