Maine’s budget commissioner is recommending $256 million in cost-savings measures as part of a plan to close a massive coronavirus-induced budget gap that will use federal funds and money from higher-than-expected liquor sales to prevent deeper cuts.
The proposals outlined by Gov. Janet Mills’ budget office on Wednesday will shape months of debate in Augusta. The reductions are seen as a preventative measure to keep the state from running a deficit, but many uncertainties that will affect state funding — from the course of the pandemic to the actions of Congress — remain.
Mills, a Democrat, ordered widespread reductions after state revenue forecasters predicted a $1.4 billion funding shortfall through mid-2023, of which $528 million is expected for the budget year ending in mid-2021. Most department heads were told to identify ways to cut their general fund budgets by 10 percent, but they were not allowed to eliminate entire programs.
This proposal appears to avoid having to cut existing funds from the current budget and layoffs for now. Kirsten Figueroa, Mills’ budget commissioner, proposed taking $130.5 million from unspent appropriations from the previous fiscal year, as well as setting aside $125 million in general fund money in this year’s budget freed up from improved Medicaid matching rates and continued cost mitigation efforts like hiring freezes, to counter the bulk of the shortfall.
About $97 million in federal funding under the CARES Act could be used for payroll costs for public health and public safety employees and $70 million from higher-than-expected alcohol sales would round out the rest. It does not pull from Maine’s rainy day fund, but does utilize $106 million in reserve funds.
Identifying those reductions “was painstaking,” Figueroa wrote, and may be even more difficult in the future without additional federal funding.
If she agrees with the proposal, Mills could use an executive order to curtail money from the state and highway budgets, a Figueroa spokesperson said. An expected shortfall of more than $800 million in the next two budget years will likely be haggled over in the Legislature during the biennial budgeting process that will start early next year.
Members of the Legislature’s budget panel had mixed reactions to the proposal. Rep. Drew Gattine, D-Westbrook, who co-chairs the committee, praised the proposal for allowing the state to “realize necessary savings” without major cuts.
But Rep. Amy Arata, R-New Gloucester, said the increase in liquor sales was a sign of increased substance use during the pandemic. Those funds “should be used to address the increase in substance abuse and the resulting societal issues,” she said.
Mills has indicated she would like to avoid cuts to state jobs, health care services and education aid, which are among the most expensive general fund costs in Maine. She gave department heads more time to craft their budgets for next year in hopes that federal aid will arrive in time to prevent the otherwise necessary reductions.
Federal aid remains uncertain. While the Senate has returned from recess, a trimmed-down bill from Republicans is already in trouble, as House Democrats have indicated they are not interested in anything that does not include more aid for local governments and unemployment. Divisions between Republicans could also keep the bill from getting 51 votes, Politico reported.
That variability was clearly on the minds of Maine’s teacher and state employees unions, both of which Mills had looked to reassure last month would not bear the fallout of the shortfall.
Dean Staffieri, president of the Maine Service Employees Association, said it was clear “essential services in Maine and throughout our nation could be at risk with no end to the pandemic in sight” if more federal aid does not arrive. Maine Education Association President Grace Leavitt said maintaining funding is more important than ever as the “complexities of returning to schools safely during this pandemic are extremely challenging.”
There is precedent for those unions to be concerned. Gov. John Baldacci put in place employee furloughs and froze merit pay while trying to shrink a $500 million shortfall in 2009 in the middle of the last recession. He later went back to the drawing board and proposed reductions in education aid and social services when the shortfall increased again.