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

Greetings, this is Josh Tardy, leader of the Republicans in the Maine House of Representatives.

On behalf of all Republican legislators, I want to wish everyone a happy Thanksgiving holiday weekend. If there is one thing we can be thankful for right now, it is that Maine is in relatively good shape economically compared to such states as California and New York, where budget deficits have reached astounding levels. But Maine is not an island. We are not immune from the historic financial chaos that has now engulfed the nation, and we have work to do.

A new Legislature officially opens next week, when members of the House and Senate will be sworn into office. Regular sessions won’t begin until after New Year’s. But when they do start, the action will be fast and furious. The first major order of business will be making sure that the state budget remains balanced, as required by law. According to the economic forecasters, we need to reduce spending by about $150 million between now and the end of June, when the current fiscal year ends. Obviously, in an economic downturn as severe as this one, tax revenues of all kinds start to slide – sales taxes, income taxes, real estate transfer taxes and so on down the line. That explains the budget shortfall.

The governor took the first step last week by announcing $80 million in spending reductions. That leaves another $70 million to go to reach $150 million. The whole deal will be contained in a supplemental budget that the governor will produce by the middle of December.

This supplemental budget must be passed by a two-thirds majority of both houses of the Legislature to take effect immediately. There will be fighting over some items, especially the $28 million reduction in spending on education, which the governor has called for. That cut raises the issue of property taxes. If the state cuts aid to schools, will cities and towns make up the difference by increasing taxes on real estate?

There also may be fighting over the proposal to cut $31 million in the Department of Health and Human Services, but that will be less controversial. According to the governor’s plan, $25 million of that amount can be achieved through accounting adjustments, revamped payment schedules and the usage of unspent federal funds.

A breakdown of the governor’s spending curtailment order for Health and Human Services does raise some questions. For example, if the state can save $7 million by switching some payments from biweekly to monthly, why haven’t we been doing this all along? In the overall scheme of the state’s budget, $7 million might not seem significant. But to Mainers facing these tough economic times, it’s an awful lot of money. When we pay our taxes, we expect every penny of that money to be used wisely. It should not require an economic crisis to expose waste hidden deep in the bowels of the bureaucracy.

Once the Legislature passes this $150 million supplemental budget, it will take up the 800-pound gorilla – the state budget for the next two years. The governor will present the budget to the Legislature on January 9th. That’s when the real fireworks will begin as we start dealing with a budget shortfall of about $500 million. According to the economic forecasting committee, taxes will come in $330 million below earlier projections for the next two years. And other forces always push up the budget – higher costs for medical care, fuel, state employee salaries and so on. All told, we’ll need $500 million in cuts, although in these perilous and unpredictable economic times, who can say what will happen to tax revenues two years from now?

To the governor’s credit, he has already told all department heads to lower their budget requests by 10 percent. On paper, that would mean about $600 million in spending reductions. But the Legislature will have the final say on the budget, and legislative battles are not fought on paper. They are fought in the halls of the State House, in committee rooms and in face-to-face encounters with people who will bear the brunt of these cuts. We are in for a great deal of unpleasantness in Augusta.

There is one ray of hope on the horizon. Considering the massive budget deficits now facing state governments – nearly $70 billion for this year – Congress and the incoming administration are talking about a bail-out for the states. But we can’t count on that – not yet. Instead, we should use this crisis as an opportunity to get Maine’s spending under better control. We seem to have budget shortfalls in good times and bad, so we need to look not just at quick fixes and one-time solutions. This calls for the kind of fundamental spending changes that are long overdue. We could handle this economic emergency more easily if we had been more vigilant in managing state spending over the years. But we let those chances slip by, and now there’s no easy way out.

This is Josh Tardy. Thanks very much for listening.

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