PORTLAND — Gov. Paul LePage will consider ordering state agencies to curb spending to deal with an estimated revenue shortfall of $35.5 million.
The state revenue forecasting committee issued the revised estimate Wednesday for the current fiscal year ending June 30 – the estimated revenue shortfall was $26 million as recently as October.
Members of the Legislature’s Appropriations Committee were to be briefed on the shortfall Thursday morning by the forecasting committee.
“It has been a combination of things. The economy has not grown as fast as we anticipated, and we saw a spike in energy prices in late summer, early fall,” said Michael Allen, associate commissioner of tax policy, who also serves as chairman of the revenue forecasting committee. “And we have the fiscal cliff issue that is causing businesses and consumers to be a little more cautious.”
All of those factors have eroded consumer spending and caused revenues from corporate, individual income and sales taxes to decline along with business and consumer spending.
LePage was attending an education conference in Washington, D.C. on Wednesday, but was expected to be briefed Thursday morning on the situation by Sawin Millett, commissioner for Administrative and Financial Services.
The shortfall came to light Wednesday during a meeting of the Revenue Forecasting Committee, which is required by statute to meet twice a year to revise state revenue forecasts.
“It does look like we have a significant shortfall,” said Adrienne Bennett, the governor’s spokeswoman. “We’ll have to wait and see what direction the governor decides to go.”
Millett said he will recommend the governor issue a state spending curtailment order as soon as possible.
“That’s the only way you can assure spending won’t exceed income, and that’s absolutely what the (state) constitution requires,” Millett said.
Millett said the projected shortfall reflects broad issues in the larger economy, such as how the federal government will handle the fiscal cliff, and high energy costs. Discretionary spending is down and consumers are not making long-term purchases, he said.
“In general, people, since the election, have adopted a sense of uncertainty about how the federal government will respond to those challenges,” Millett said.
A spending curtailment order, once issued by a governor, takes effect immediately. It has historically been issued when the Legislature is not in session.
Legislators are due to be sworn in Dec. 5, but the session is not expected to resume until early January.
Richard W. Rosen of Bucksport, Republican Senate chairman of the Appropriations Committee, said a curtailment order allows the chief executive to reduce spending, provided that the spending reduction is done in a “judicious and equitable manner.”
“He cannot pick and choose where he wants to reduce spending,” Rosen said.
Rosen said a curtailment order seems appropriate given the state’s current fiscal situation. If a curtailment order is issued, the Legislature would be asked to approve a supplemental budget in January to reflect the order.
“There isn’t another route between now and January that is workable. I think it would be a reasonable step, one that Gov. (John) Baldacci had to rely on,” Rosen noted.
Democrats say LePage has the authority to issue a curtailment order, but they’d like the opportunity to discuss other options, such as waiting until the session begins and letting the Legislature address the shortfall, said Jodi Quintero, spokeswoman for the House Democrats. Quintero said former Gov. John Baldacci issued spending curtailment orders on at least two occasions.
Quintero said Bennett assured her Wednesday night that no final decisions had been made. Quintero views that as a step toward developing a more positive relationship with the governor.
“We’re hitting the reset button with the governor. We heard throughout the campaign that the people want results,” said Quintero, referring to how partisan politics has affected government decision-making.
Republican Senator Roger Katz of Augusta, who serves on the Appropriations Committee, said he would like to explore the possibility of convening the Legislature in December after members have been sworn in rather than waiting until January. An early session would avoid the need for a curtailment order and give legislators the chance to solve the shortfall instead of the governor through a supplemental budget or other means.
“This is a great opportunity to work together in a non-partisan way to solve a big problem,” Katz said.
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