Republican radio address

For the weekend of August 28-29, 2010

Greetings, this is Les Fossel, state representative from Alna.

August is a slow month for news, but the news we did get about Maine’s economy was not exactly upbeat. A few days ago, for example, we learned that Maine’s unemployment rate ticked higher last month to 8.1 percent, during what the Obama Administration is calling “the summer of recovery.”

This week we also got word that Maine sales of existing homes fell 30 percent in July, one of the biggest declines ever. Realtors blamed the drop on the end of the big tax credit program for homebuyers. Still, it’s disturbing to see sales fall off so steeply at a time when house prices are at bargain levels and mortgage rates are the lowest on record.

At the same time, employers all over Maine have gone into sticker shock after seeing their new health insurance rates. The president assured us that rates would go down under ObamaCare, but instead ours have taken off like a rocket, jumping by 25 percent or more. This is one of the major reasons that unemployment remains so high. Many employers are already financially strapped, and somehow they will have to compensate for these stiff new rates. They will hire fewer people or let go of employee or opt for policies with even  higher deductibles. Maine’s insurance rates were already among the highest in the country. ObamaCare has made them a lot worse.

Mainers are highly attuned to our economic conditions. An opinion poll released Wednesday reported that 45 percent of state residents say they are worse off than a year ago. Only one in five expects to be better off in 2011. This is after the government spent more than $800 billion in stimulus money that we were told would jump-start the economy and hold down unemployment.

According to the poll, only 35 percent of Mainers say now is a good time to make a major purchase. That’s down from 42 percent a year ago. Looking more broadly, 44 percent of those surveyed expect the country as a whole to experience bad economic times in the year ahead, but 61 percent expect Maine to have bad financial times next year. In other words, most Mainers see our state doing worse than the nation as a whole.

The situation isn’t much better at the state government level. A new governor and new Legislature will take office facing a budget shortfall or structural gap of roughly $800 million. You may have heard that legislators will have to cut spending by more than $1 billion, but the good news is that the problem is somewhat smaller, as long as the economy doesn’t take another dive. We should be able to avoid the fiscal Armageddon that has been so widely discussed.

It’s worth noting that the $800 million shortfall includes the huge new pension obligation – some $287 million – to cover investment losses. Another important positive development is that MaineCare costs have fallen by 3.6 percent since last year.

Based on the latest information from the Legislature’s fiscal office, revenues will fall short of the baseline budget forecast by about $385 million in  the next biennium. But there are a few things that might be added to that amount. For example, it would cost an additional $120 million if state employees returned to a normal work schedule with no shutdown days and resumed annual merit increases. Maintaining the current shutdown schedule and keeping the freeze on merit pay would save $120 million. That won’t be popular with state workers, but before they complain, maybe they should talk to people who can’t find jobs at all.

Here’s another big number to add in – $240 million. That’s the price tag on funding local schools for two years at the 55 percent level required by law. That would be above and beyond the roughly $900 million per year that the schools already receive from the state. Maine has never reached the 55 percent level. If the schools are flat funded in the next budget, Mainers could avoid that additional cost.

Making big budget cuts won’t be easy, but we have no choice. However, if legislators work together in good faith, the state can survive this crisis and come out stronger on the other side of the recession. It will take sacrifice, but it can be done.

This is Les Fossel. Thank you for listening.