Legislative Panel Approves Biennial Budget

May 19, 2009

AUGUSTA– After months of public hearings, work sessions and revenue reforecasting, the Legislature’s Committee on Appropriations and Financial Affairs unanimously approved a supplemental budget for the remainder of 2009 and the biennial budget for fiscal years 2010 and 2011. The $5.8 billion spending bill meets the state’s Constitutional requirement to balance the budget and does so without raising broad based taxes. It will now go to the full Senate and House for consideration.

“I applaud the efforts of the Appropriations Committee. They worked together in an open manner to craft this budget under very difficult financial circumstances. By involving the public to such a great extent it is clear to me that the committee looked beyond sheer dollars to gauge the impact that hundreds of millions of dollars in cuts will have on the people of Maine,” said Senate President Elizabeth Mitchell.

The economic crisis has resulted in a decline of $1.4 billion in revenues since November, 2008, forcing the Legislature to reduce the budget for the coming fiscal years to 2004/2005 levels. While the cuts are broad and deep, the spending bill maintains services at a level that ensures a safety net is in place and makes smart investments that will create jobs now and continue to pay dividends in years to come.

“The steep and sudden decline in revenues put us in a very difficult situation,” said Speaker of the House Hannah Pingree. “This budget is austere and reflects the difficult times we face. I want to thank the members of the Appropriations Committee for keeping focused throughout this long process and for bringing it to a conclusion without acrimony – it was not an easy task.”

Governor Baldacci released his initial budget in January which aimed to close an $838 million structural gap. As the recession worsened and state revenues continued to decline, the Governor proposed a change package to close an additional gap of $569 million.

Major provisions of the budget include:

$1 billion in 2010 (up from $983 million in 2009) and $947 million in 2011 for K-12 education. This maintains funding levels in 2010 and gives school districts time to plan for reduced state aid in 2011

$26.5 million for debt service that allows for investments in transportation, conservation, research and development and more through a multi year bond package

$1.6 billion for the Department of Health and Human Services

Reduces Medicaid spending for high-cost specialty drugs by purchasing them through preferred providers, reducing the cost of prescription drugs while continuing to give patients access to life saving medicines

$96.7 million in state funds and $276.3 million in federal funds (total $373 million) payment to Maine hospitals to settle disputed payments

Changes the MaineCare reimbursement rate to Critical Access Hospitals from 117% to 109% of cost

Increases MaineCare reimbursement rates to private physicians from 53% of Medicare to 70% of Medicare

Approximately $270 million for property tax relief through municipal revenue sharing, the Homestead, BETR, Tree Growth and Circuit Breaker programs

The following changes to the above mentioned property tax relief programs result in a savings to the state of $24.3 million: a 5% reduction to the Tree Growth Program, a reduction to Revenue Sharing, a 20% across the board cut to the Circuit Breaker, and a reduction of the Homestead Exemption to $10,000 in FY 2011, leaving it as-is in FY 2010

A two year savings of $16 million through suspension of the Net Operating Loss Carry Forward

10 state government shutdown days in both 2010 and 2011 and a provision that requires state employees to pay a portion of their health insurance commensurate with their salary. Employees can earn back a portion of their premium by successfully participating in a state wellness program

$30 million in savings from a commission on streamlining government

$55 million in funding for the Legislative Branch, a reduction of $4.3 million

$138 million for the Judicial Branch to operate the Courts

$77 million in revenue bonds to consolidate and modernize court houses in Piscataquis, Kennebec and Washington Counties (debt service is $700,000 for the biennium)

$535 million for Maine’s colleges and universities, a two year cut totaling $6 million

A partial freeze in the indexing of individual income tax brackets, resulting in $13.9 million in saving

Stepped up enforcement of state tax collection will result in $14.6 in additional revenue over the biennium

Makes use of $116 million from the state’s Rainy Day Fund and the Working Capital Reserve Fund

Transfers $2.2 million from the state’s Clean Election Fund and reduces the initial disbursement to candidates by 5%

Increases fees for licenses and permits at the Departments of Inland Fisheries and Wild Life and Marine Resources

The two year general fund budget utilizes $409 million in economic stimulus money provided through the American Recovery and Reinvestment Act.