Last Thursday, federal revenues that Augusta legislators expected to balance this year’s budget dried up, leaving Maine $85 million short.
Maine state legislators had been counting on increased federal funding for social programs like Medicaid, unemployment insurance, SCHIP, and
TANF, but the temporarily higher reimbursements for the programs were rejected by the Senate.
The discontinuation of the elevated Federal Medical Assistance Percentages, which had authorized larger matching fund allocations for state-administered social service programs, came as a surprise to the Baldacci administration and senior Maine legislators.
Peggy Schaffer, Chief of Staff for Senate President Elizabeth Mitchell, said that a rejection of the augmented FMAP funding was not anticipated:
“We had assurances from our congressional delegation that it would happen.”
Senator Richard Rosen, the ranking Republican member on the Joint Committee on Appropriations and Financial Affairs, agreed:
“We were assured from the Governor’s Chief of Staff, the Budget Director, all of the pundits in DC, as well as the congressional delegation that this funding would absolutely happen. We were told it was imminent, that it would probably even happen before we adjourned in April.”
Governor Baldacci must now act to rectify the budget. Finance Commissioner Ryan Low said that the Baldacci administration will “start to take the steps administratively to bring expenditures back in line with revenues.”
“In the likely event that there is no congressional action,” he added, “the Governor will initiate the curtailment process,” which Low referred to as a very “blunt” tool.
“Essentially,” he said, “ it allows the Governor to unilaterally go in and make spending reductions. We can use these kinds of tools to slow down spending until the legislature comes back into session.”
Tim Feeley, a spokesman for House Speaker Hannah Pingree, explained the Governor’s curtailment authority:
“When the legislature is not in session, and it appears that revenues are not where they should be, the Governor has until October 1 to issue a curtailment order. He can curtail spending without legislative approval.”
If the Governor initiates the process, Commissioner Low said that every department would have to submit a proposal to the Governor outlining the spending reductions it would make. It would then be up to the Governor to make the final decisions about where to cut spending.
Senator Rosen said that Governor Baldacci must reduce spending “on a fair and equitable basis. He can’t really go in and pick and choose what he wants to cut.”
Rosen said that the cuts could “certainly translate into loss of jobs or reduction of services.”
In a broader context, Rosen said that the shortfall highlights how dependent the state has been for extra money, such as stimulus funds, which had been propping up the budget. “The real challenge here is making the transition to having the state budget stand on its own.”
“The debate that’s raging in Washington,” he added, “is a fundamental debate. The question is: Are the states going to need even more money from Washington? Or can we re-align state services to fit within the revenues we get from taxpayers within the state?”
Senator Rosen will meet with his colleagues at the monthly meeting of the Joint Committee on Appropriations and Financial Affairs Tuesday morning in Augusta to discuss, among other items on the agenda, the unexpected revenue shortfall.
Editors note: Stephan Burklin is a reporter for Maine Watchdog