Republican radio address
For weekend of November 28-29, 2008

Greetings, this is Jayne Giles, state representative from Belfast and a member of the Appropriations Committee.

Once again, the state of Maine is in financial trouble, and this time we have plenty of company. The majority of states will confront deficits when governors and legislators sit down to write budgets for the coming years. Maine runs on a two-year budget, and Governor Baldacci will present his spending blueprint in January, when a new Legislature convenes in Augusta.

Clearly, the Wall Street crash and the real estate collapse have turned what had been a soft economy into an economic emergency. The stock market crash has wiped out 40 percent of shareholders’ wealth – about $9 trillion dollars. Meanwhile, some $5 trillion dollars in real estate value has disappeared.

In other words, a total of $14 trillion in national wealth has vanished into thin air. It’s no wonder people are feeling poorer than they did a year ago. When you combine that huge loss with rising costs for food and fuel, you have the makings of a serious economic downturn. At a time like this, most consumers cut back their spending to necessities and businesses hunker down to ride out the storm as best they can.

You may have seen reports that Maine government faces a shortfall in the next budget cycle of about $500 million dollars. That’s actually low. In the Appropriations Committee this week, revenue forecasters put the figure at about $650 million. In other words, if we funded every department at the levels they have proposed, the state would come up short by $650 million. All government departments take their spending levels for this year and add more money for the coming years. That has been standard budgeting procedure for decades. But this year is different.

Maine has not yet felt the full fallout of this economic storm at the state level, but it’s clear that no state will emerge untouched. Maine’s revenue streams will be hit on all fronts – sales taxes, real estate transfer taxes, income taxes and the rest.

The governor, to his credit, has moved proactively. He has ordered all department heads to reduce their budget requests by 10 percent. If those reductions hold, they will total roughly $660 million, which equals about 10 percent of the current budget for 2008 and 2009.

The governor also says he will cut his own operating budget by 10 percent in the Office of the Governor. And legislative leaders are already figuring out ways to cut the Legislature’s projected budget, which is tentatively pegged at just over $59 million – or about 1 percent of state spending.

Regardless of what the governor proposes, the ultimate responsibility for the state budget rests with the Legislature. Legislators will write the final budget and determine where any spending reductions will be made. And the Legislature will vote on the final budget bill.

The good news – if you can call it that - is that Maine is in much better shape than our New England neighbors, where budget shortfalls are in the billions. Banks in Maine are in good shape and are making loans. We have not had home foreclosures at anywhere near the high rates experienced in other parts of the country, especially in Florida and California. And our revenue declines have not yet been severe, although they are expected to worsen over the next few months.

Maine right now has an opportunity to position ourselves for a strong recovery from this economic turbulence. We should use this chance to improve our business climate, which is ranked the fourth worst in the nation. We should eliminate the unnecessary regulations that make Maine unfriendly to business. We should finally reform our health insurance system to bring us in line with the majority of states, where costs are much lower. And we should follow the governor’s lead on taxes. He says that reducing our extremely high income tax rates is a top priority of his last two years in office, and we’re glad to have him on board with a Republican priority.

In short, we should use this as an opportunity to strengthen our business climate. By keeping Maine businesses strong and Mainer people working, we will weather this financial storm more easily and come out of it better-prepared and financially stronger for the future. Here in our small state we can control our own destiny by preparing ourselves to do well once the financial emergency ends.

This is Representative Jayne Giles. Thank you for listening.

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