Wednesday, May 22, 2013
By Jack Nicholas
AUGUSTA - It's been said that "a lie told often enough becomes the truth."
That explains why some opponents of former Gov. Angus King claim he inherited a budget surplus and left a $1.2 billion deficit and an empty rainy day fund. Such assertions should not become the accepted belief.
Consistent with the Maine Constitution, state government cannot have a deficit. The Bureau of the Budget issues four-year budget forecasts for the current biennium and the next biennium comparing General Fund revenue projections from the Revenue Forecasting Committee to estimates of General Fund spending based on current law. Since the early '90s, these budget projections have yielded a "General Fund structural budget gap" in the next biennium.
When King took office in January 1995, he faced a projected "General Fund structural budget gap" of between $150 million and $300 million for the fiscal year 1996-97 biennium. Maine was still reeling from a real estate market collapse. Our traditional manufacturing industries were in steep decline, and there was only $6.4 million in the rainy day fund.
King immediately began rehabilitating Maine's economy. Fiber optic cables connected Maine on a global scale. The state's transportation infrastructure was upgraded, facilitating the flow of commerce and people as never before. Critical investments were made in neglected public infrastructure, from schools and R&D to low-income housing and wastewater treatment facilities, improving quality of life and job opportunities statewide.
Tax cuts were implemented, and the budget was balanced without gimmicks. The rainy day fund was increased to an all-time high of $143.7 million. All of these positive events were recognized by the three credit rating agencies. While Standard & Poor's maintained its already solid AA+ rating, both Fitch and Moody's increased Maine's ratings to AA+, marking the state's first credit rating upgrade in many years
Among the reasons for the strong ratings, the agencies noted that:
• "Maine's economy is continuing to diversify";
• "Economic expansion continues, outperforming (the) region and nation";
• "A low debt burden with a rapid amortization schedule"; and
• "Conservative budgeting, careful revenue monitoring, and improved financial reporting."
By exercising fiscal discipline, making prudent investments in people and infrastructure and implementing policies that allowed business to flourish, Maine's economy took off. Taxes were cut by $428.9 million, reserves were nearly $150 million, per capita income grew by 25 percent and unemployment plunged to 3.1 percent, an all-time low.
Quality of life improved significantly during the King years. Maine was rated the best state in which to raise a child, the K-12 education system was ranked first nationally, environmental stewardship reached a high-water mark, prescription drug prices were slashed and the state led the nation in providing laptop computers to all seventh- and eighth-grade students, heralding a new era of using technology to achieve student success.
King was entering the homestretch of his second term. Maine's economy was firing on all cylinders. Then the unthinkable happened.
On Sept. 11, 2001, terrorists brought the World Trade Center crashing down, dashing America's hopes and dreams. New York's twin towers became a metaphorical financial bar graph. When they collapsed, so did the economy of every state, including Maine. The reverberations rocked the financial world and caused the stock market to tank, taking a major source of Maine's income, capital gains.
Thanks to King's foresight in growing the rainy day fund, Maine was able to weather the resulting economic downturn by using those reserves to keep the state functioning. Despite using nearly $115 million from the fund, he still left $29.4 million, nearly five times the amount he inherited.
Regarding the oft-mentioned "deficit" that King supposedly left, there wasn't one. The Bureau of the Budget had identified a "General Fund structural budget gap" for the fiscal year 2004-05 biennium of $787.1 million. The Legislature's Office of Fiscal and Program review estimated the "gap" at $958.2 million. A deficit is when government spends more than it has, but a "structural gap" is when government does not have as much as it anticipates spending.
It's a budget situation that requires strategic thinking and compromise. That's why difficult political circumstances are best handled by results-oriented leaders capable of working with all factions involved.
Leaders like Angus King.
Jack Nicholas served as state budget officer for Govs. John McKernan and Angus King.