There are still mostly unknowns about how much federal stimulus funding is headed Maine’s way and how it will be divided, though understanding about what the money can be spent on is solidifying.
Among the approximately $900 million coming to Maine is robust funding for Medicaid and general purpose aid for education, which together consume more than half of the state budget. The funding will restore a $27 million cut in general funding to education that the Legislature enacted in January and enhance education funding for the next two years, but some worry that all the extra money could end up being a curse in disguise if not handled properly.
Ryan Low, commissioner of the Department of Administrative and Financial Services, cautioned the Appropriations Committee Feb. 20 against believing any estimates about how much stimulus money is coming to Maine because the numbers shift considerably as more is learned about the stimulus bill.
Some groups have speculated that as much as $470 million is coming to Maine in Medicaid funding, but Low estimated the actual amount is probably closer to $320 million.
“It will be a while before we know where all the resources are going in this bill,” said Low.
With details remaining elusive, Low and the committee focused on preparing for the arrival of the stimulus funds, particularly the task of setting up a transparency and oversight process that will follow every dollar until it is spent. That will require hiring about six accountants and auditors on a temporary basis.
Of major concern to many is putting the funding to the best use possible and not inflating state programs in a way that creates a budgetary “cliff” in the future, after the stimulus money is gone and spending goes back to what regular state and federal revenues can support.
“All this money flowing into Maine could end up hurting us in the end if we’re not careful, but I think we can really minimize that,” said Sen. Bill Diamond, D-Windham, who co-chairs the Appropriations Committee, in an interview after the hearing.
There are some areas where creating a cliff is unavoidable.
In his biennial budget proposal, which is under debate in the Legislature, Gov. John Baldacci proposed using $98.8 million in stimulus funding to close part of a revenue gap in Medicaid. The amount of stimulus money bound for Maine’s Medicaid program – which will be the result of the federal government paying a higher percentage of the total cost between now and Dec. 31, 2010 – is expected to be much higher and will come with restrictions about how it can be spent.
Education funding is another potential obstacle. The stimulus law requires the state to restore a $27 million cut in general purpose aid that was made in the current fiscal year, plus use the rest of its pool of money to bolster education funding in the next two years.
“We must assume that at the end of those two years federal funding will revert to previous levels,” wrote Education Commissioner Susan Gendron to superintendents in a memo dated Feb. 18. “We must assume … that combined federal and state subsidy funding starting in 2012 will be significantly lower than it will be in 2010 and 2011. New programs created with an infusion of new funds may not be sustainable once those funds disappear.”
Low said as much as possible, local districts will be asked to use the extra funding on one-time projects that will save money in the long term, such as energy efficiency measures.
“If there’s one thing I’ve learned in the last four weeks of going through this bill is that there is a very high level of expectation that these funds are going to solve all of our problems,” said Low. “We had a huge backlog before the stimulus funds came and we’ll have a backlog after the stimulus funds come. They’re not infinite resources and they’ve largely been determined by a formula.”
One area of the stimulus bill that is relatively clear is a package of tax cuts that will save Mainers more than $645 million collectively. Among those tax cuts is an $8000 tax credit for first-time home buyers, a sales tax break on any new car purchased between Feb. 17 and the end of the year, a tax credit for earned income up to $400 per person and an increase in the individual alternative minimum tax which will save Mainers $287 million.
(Statehouse News Service)
