Departments across state government are resorting to reductions in services and changes in what they do to balance their budgets in an economic climate that dredges up memories of the early 1990s.
After years of revenue-driven belt-tightening, the days of reducing spending without cutting services are over. More than $140 million in budget reductions proposed since November by Gov. John Baldacci – all of which must be absorbed in a fiscal year that’s already half over – have impacted the state in many ways.
The Legislature must act on the 2009 supplemental budget when it convenes in January, but many have accepted the spending cuts outlined in it as inevitable. From public schools to forests to hospitals to the Maine State Museum in Augusta, reductions are changing the face of state government, according to people whose jobs are to watch the system.
The two items that consume the majority of the state’s budget, education and health care, are both feeling the effects of the recent reductions. Advocates in both areas warn of long-term consequences that could stem from the proposals being considered.
A proposed $27 million reduction in state funding for education, which school districts across the state are scrambling to deal with, is “short-sighted,” according to Chris Galgay, president of the Maine Education Association. His concern is about the implications for the future.
“Our economy depends on a good education system,” said Galgay, whose organization represents public education in Maine from kindergarten through college. “If the purpose is to turn the economy around, than I think this is short-sighted. Maine teachers and students will pay the price for these short-term fixes.”
Galgay said cuts in the university system and community colleges in particular undermine the state’s efforts to attract economic development. “I don’t see how you can build a quality education system when you’re constantly being squeezed,” he said. “The state has lost its way in its commitment.”
Galgay said that if funding is going to be cut, state and federal “initiatives” should be reined back unless they come with funding. One such initiative is a state law that teachers be paid $30,000 per year. Galgay said too much of that increase is being pushed onto local budgets already, though he said to offer someone less than $30,000 a year to be a teacher is “criminal.”
“Our members across this state are giving everything they can,” said Galgay. “This is the most devastating issue we’ve had to deal with in public schools since the early 1990s. Nothing is possible without funding.”
Hurting hospitals
Hospital revenues will also suffer if two provisions in the supplemental budget make it through the Legislature.
One of them, which would reduce Medicare reimbursements to hospitals that employ doctors by $9.8 million in state and federal dollars, has been defeated by the Legislature multiple times, said Gordon Smith, spokesman for the Maine Medical Association, which represents doctors. That’s because the reimbursement is viewed as a valuable tool in attracting and retaining physicians.
“This is one vehicle many of the rural hospitals used to keep doctors in that community,” said Smith. “It doesn’t look like they’re really interested in retaining and recruiting doctors to Maine at a time when there is an acute shortage.”
Smith said Maine has a shortage of about 250 doctors, including a dearth of more than 100 primary care physicians. Those numbers follow a national trend that’s leading to a 100,000-doctor shortage by 2025.
“If I’m a doctor out of medical school, why would I practice in Augusta when I can make twice as much money outside of Cleveland?” said Smith.
Mary Mayhew, president of the Maine Hospital Association, said more than half of physicians in Maine are represented by hospitals, though not every hospital employs physicians.
“This is the last thing to do at a time when we’re dealing with a physician shortage and people are losing access,” said Mayhew. “This is a direct cut to hospitals.”
Another proposed cut in funding to hospitals would affect Maine’s 15 critical-access hospitals, which are hospitals with less than 35 beds. The cut would reduce reimbursements from 117 percent of the hospital’s cost to 101 percent. Mayhew said the reason for the elevated rate is because the state taxes small hospitals to leverage federal Medicaid dollars into Maine and then reimburses them at 117 percent of their costs.
“By cutting this, they will simply be taxing these hospitals and not returning any of the match,” said Mayhew. The state estimates that this cut is worth about $2.9 million in state and federal funding, but Mayhew predicts that it will be higher than that by the end of the fiscal year. On top of that, Mayhew said the state still owes hospitals more $400 million in MaineCare payments for services dating back to 2006.
“If this debt could be addressed, it would make a significant impact on hospitals and their ability to weather this storm and continue their missions,” said Mayhew. “The hospitals are dealing with the same economic challenges that all other businesses are dealing with.”
Pruning posterity
Among the items outlined in the 130 pages of spreadsheets that constitute the changes Baldacci proposes to current spending are hundreds of lower-cost items than the millions being cut in education and health care. Advocates of some of those programs have a hard time finding a voice among the compelling chorus of needs coming from so many vital state agencies.
One of those advocates is J.R. Phillips, director of the Maine State Museum, which faces the State House in Augusta. Among the $50,000 cuts proposed there are four half-time positions, some of which were already reduced in previous years.
Lost will be the volunteer coordinator, which Phillips fears will lead to a slow reduction in the number of volunteers the museum can retain. Another cut eliminates an education scheduler that coordinates hundreds of tours of the museum, State House and Blaine House every year. Two other cuts would eliminate exhibit preparers, leaving only one person to do what used to be done by five.
“The museum is going through horrible times,” said Phillips. “We are a part of it.”
Phillips said he fears more cuts in the future, and not just in state funds. As the economy declines, so do donations.
“We expect that some sources will not be available to us in the future,” he said. “There will be much increased competition for the money that is available.”
One thing working in favor of the museum is that its core mission of maintaining a collection representative of Maine’s natural and cultural history is spelled out in law.
“We’re not willing to give up quality and accuracy and therefore we’ll have fewer exhibits,” he said. “There’s no point in doing this if it’s not done accurately.
Looking forward
Senate President Libby Mitchell, D-Vassalboro, has said she hopes the Legislature can act on the supplemental budget quickly, perhaps by the end of January. Whatever the Legislature does, there is little hope that cuts to the current budget can be avoided when more than $800 million more are coming in the next two-year budget cycle.
“The next two-year budget forecasts are not looking much brighter,” said Mitchell last week in an interview. “The Legislature is fully aware that the hurt is just beginning. People we represent are hurting and getting pink slips.”
Baldacci has repeated his pledge on several occasions that despite the situation, he will oppose the use of new taxes and fees to balance the budget. Senate Majority Leader Kevin Raye, R-Perry, welcomed that sentiment after the supplemental budget was released last Tuesday.
“The people pretty strongly rejected the notion of new taxes when they rejected Question 1 on the November ballot,” said Raye, referring to a referendum to tax beverages and insurance carriers to fund Dirigo Health program, a state-subsidized insurance plan. “It’s the wrong time to be taking more money out of peoples’ pockets.”