The Legislature’s Appropriations Committee will convene this week for the grim task of fixing a budget situation that’s becoming worse by the day.
The committee’s goal is to find $30 million worth of savings across state government that can be put into place in fiscal year 2011. That task is ordered in the biennial budget bill passed late last session by the Legislature.
Since then, however, revenues have continued to slide at a rate that’s literally incomprehensible to Maine Revenue Services. The rate of economic decline is so severe that computer modeling programs can’t keep up.
Grant Pennoyer, director of the Office of Fiscal and Program Review, sounded the alarm last week in his “Fiscal News” newsletter that revenues for May and June were even worse than predicted in early May, perhaps in the range of $40 million to $50 million below budget. There’s a provision in place to deal with that shortfall, but the fear is that the trend will continue.
“The Appropriations Committee may need to address a problem for the remainder of the 2010-2011 biennium that may be three to four times the $30 million target of the continued initiative to streamline state government,” wrote Pennoyer.
General Fund revenue was more than $21 million under budget in May alone, and the situation could be worse in June. Those numbers are expected to be available by the end of this week, said Ryan Low, commission of the Department of Administrative and Financial Services.
“We know they’re bad, but we don’t know the exact numbers yet,” said Low. The plan is to use the remainder of the “Rainy Day Fund” to cover the fiscal year 2009 deficit, but that money was already allocated to the fiscal year 2010 budget. That means using it creates another budget hole that lawmakers must plug with more cuts in services.
“What we need to do over the next several weeks is determine how much of this is ongoing,” said Low. “Is this a two- or three-month blip in the revenue picture, or are we looking at between $10 million and $20 million off every month for the rest of the forecast?”
Low is scheduled to provide the latest, best guess of an answer to that question when the Appropriations Committee meets Thursday afternoon. Also scheduled is an update on the state’s cash flow situation, which has been deteriorating for months and could lead to the need for borrowing as a temporary solution for keeping state government in operation.
“We’ve got some tremendous financial obstacles going on,” said Sen. William Diamond, D-Windham, Senate chairman of the Appropriations Committee.
The committee is supposed to formulate a plan to fill the $30 million budget hole in time to present to the full Legislature when it reconvenes in January. Whether or not the committee will also begin to address additional revenue downturn seen in May and June is not yet decided, and depend in part on whether the deterioration continues.
Rep. Emily Cain, D-Orono, the House chairwoman of the Appropriations Committee, stressed that the committee will seek solutions that will continue to save money into the future as opposed to one-time savings initiatives.
“We’re really looking for structural changes,” she said. “These are going to be very difficult decisions.”
Cain said one of the issues that needs to be decided early in the process is how to incorporate comments from the public as the committee sorts through ideas from lawmakers and the executive branch.
