– SUSAN M. COVER

Kennebec Journal

AUGUSTA – The state may face a $100 million budget deficit because the U.S. Senate did not pass a bill to extend an increase in Medicaid funds, the state’s top finance officer said Tuesday.

The projected shortfall grew from the original estimate of $85 million because the bill also would have prevented funding from going down next year, said Ryan Low, commissioner of the Department of Administrative and Financial Services.

Without that “hold harmless” provision, and without the funding, the state must begin considering spending cuts to close the gap in the budget for the fiscal year that starts Thursday.

“Obviously, we’ll strive to minimize harm, but reductions of this magnitude are not easy to accomplish,” he said. “We’ll continue to try to make our case in Washington, but we’ll plan for the worst.”

Low said the bill has come up and failed before, and now it apparently will be put on the back burner. It fell three votes short in the Senate last week and was opposed by both of Maine’s senators, Republicans Susan Collins and Olympia Snowe, who said they opposed tax increases in the measure.

Maine lawmakers approved the state’s two-year, $5.55 billion budget — which depends on the federal money — in March.

Language in the budget says that without a federal law to provide the funds by July 1, the governor must begin to make spending curtailments that take effect by Oct. 1. Most of the cuts are likely to come from education and the Department of Health and Human Services, which account for the largest portions of state spending, Low said.

Starting next week, state agencies will be asked to submit ideas for cuts, beginning the process in which some state spending is suspended.

Although curtailments have been used in recent years to keep the budget in balance, the mechanism doesn’t give the governor much flexibility, Low said.

The state will end the 2009-10 fiscal year today with a $50 million surplus, about $32 million of which could be used to help close the Medicaid funding gap.

MaineToday Media State House Reporter Susan Cover can be contacted at 620-7015 or at:

scover@centralmaine.com