Senate Enacts Budget, Goes to Governor for Signature

May 27, 2009

With a strong bipartisan vote, the Maine Senate approved the $5.8 billion spending plan for state government for fiscal years 2010 and 2011. The bill also included appropriations for the remainder of 2009. The 33-2 vote in the Senate represents the highest number of affirmative votes recorded on a roll call vote for a biennial budget in more than 20 years.

The budget includes a $500 million reduction from the budget for the tow previous fiscal years. The national economic recession caused state revenues to decline by $1.4 billion in just six months. The budget for the next two years reduces state spending to 2006/2007 levels, it is the first budget in 30 years to be smaller than the previous fiscal years.

“The members of both the House and Senate should be commended for the extraordinary bipartisan manner in which they worked to pass this very difficult budget,” Senate President Elizabeth Mitchell said. “In spite of the hard work of so many we take little pleasure in its passage. The reality of the economic downturn is that government will be less able to positively impact the lives of Maine people. This budget represents what we have to do, certainly not what we want to do.”

Much of the Senate debate focused on the impact the cuts would have on the people of Maine and how well the process of writing the budget worked.

“We have been forced to make cuts to every area of state government,” said Senate Majority Leader Phil Bartlett. “We have remained true to the principles of shared pain, shared sacrifice, and shared opportunity. While no one likes it, we can be proud of the product we produced by working together in a bipartisan way to get through this very difficult time.”

Roughly 50% of the budget is spending for K-12 and higher education. The state will provide more than $1 billion to school districts in 2010 and $947 million in 2011. It also includes $535 million in spending for Maine’s colleges and universities over the biennium.

The Legislature included $26 million in debt service to be used for multi year bonding of research and development, transportation, and conservation. The details of the bond package will be developed in the coming weeks.

The Department of Health and Human Services will receive $1.6 billion in funding over the next two years. In addition, the state will reform its system of paying hospitals and providers of health services. The MaineCare reimbursement rate to Critical Access Hospitals will be reduced from 117% to 109% of cost and the MaineCare reimbursement to private physicians will be increased from 53% to 70% of Medicare.

Other health related items include a $96.7 million payment to Maine hospitals for past services to MaineCare recipients, a policy shift that will reduce the cost of prescription drugs by purchasing medication through preferred providers, tuition stipends for Maine medical school students, and the implementation of a wellness program for state employees.

There is approximately $270 million in the budget for property tax relief through municipal revenue sharing, the Homestead, BETR, Tree Growth and Circuit Breaker programs. The following changes to these programs results in a collective reduction 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.

The state employee piece of the budget includes 10 shutdown days in each year of the biennium, the elimination of merit increases and longevity payments and the addition of employee contributions towards health care premiums.

Other provisions of the budget include:

• Makes use of $116 million from the state’s Rainy Day Fund and the Working Capital Reserve Fund
• $55 million in funding for the Legislative Branch, a reduction of $4.3 million
• A two year savings of $16 million through suspension of the Net Operating Loss Carry Forward
• $30 million in savings from a commission on streamlining government
• $138 million for the Judicial Branch to operate the Courts
• $77 million in revenue bonds to consolidate and modernize courthouses in Piscataquis, Kennebec and Washington Counties (debt service is $700,000 for the biennium)
• A partial freeze in the indexing of individual income tax brackets, resulting in $13.9 million in savings
• Stepped up enforcement of state tax collection will result in $14.6 in additional revenue over the biennium
• 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 Wildlife and Marine Resources

“The work of all 35 Senators in this body is commendable. The policy committees partnered with the Appropriations Committee to ensure the legislators with expertise in various areas were intimately involved in crafting this very difficult budget,” said Assistant Senate Majority Leader Lisa Marrache.

In January Governor Baldacci presented his budget that attempted to close a structural gap of $838 million. Through four months of public hearings and work sessions the Legislature conducted a thorough review of each line of the budget.

Senator Bill Diamond, Senate Chair of the Legislature’s Appropriations Committee called the budget “The most challenging task in my 15 years as a legislator. Writing this budget was a daunting task to say the least, but it represents the best result we could have in these worst of times.”

On May 19, 2009 the Appropriations Committee gave unanimous support for the budget. Tuesday, May 26, the House debated the measure and considered several amendments, rejecting all but one, which made technical adjustments to the budget document.

Senator Margaret Craven, a member of the Appropriations Committee said, “As everybody knows, the process was difficult, but we worked tirelessly to do the least amount of harm to the most vulnerable, working people and Maine businesses. This budget creates a strong foundation that will carry us to the next step of economic recovery.”

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