Politics

January 16

LePage budget chief questioned about shortfall

Lawmakers must find $119 million in savings or new revenue to balance the budget, according to the administration.

By Steve Mistler smistler@pressherald.com
Staff Writer

AUGUSTA — Gov. Paul LePage’s finance chief briefed lawmakers Wednesday on details of a $119 million shortfall in Maine’s budget, a gap almost completely driven by spending and revenue imbalances in MaineCare, the state’s Medicaid program.

click image to enlarge

Sawin Millett, the governor’s budget chief

Joe Phelan / Staff Photographer

The news is certain to intensify tensions over a supplemental budget plan that is smaller than in recent years, but will debated in the shadow of looming gubernatorial and legislative elections.

The portion of the shortfall attributed to MaineCare – $108 million – is sure to play into a dispute over whether to expand the program through the Affordable Care Act, one of the most contentious issues of the shortened session.

The MaineCare shortfall is the result in part of higher-than-expected spending on residential services and hospital outpatient care as well as the failure of some savings initiatives pushed by the LePage administration to meet targets, according to Sawin Millett, the governor’s budget chief. On Wednesday, lawmakers on the Legislature’s budget-writing committee quizzed Millett about the shortfall.

Millett provided documents to the Portland Press Herald showing declining MaineCare caseloads – there are 11,805 fewer cases this year than in fiscal 2012 – but increased use by certain beneficiaries.

“In an entitlement program like MaineCare there is no cap on growth or a precise way to forecast utilization,” he said. “Our forecasting models are improving, but it’s extremely difficult to predict spending or establish trends for a certain part of the MaineCare population.”

Democrats on the budget-writing committee lamented the lack of details about the MaineCare shortfall. They also criticized LePage for not participating in the budget process other than to say there’s a shortfall. The governor has refused to submit a supplemental budget proposal since the summer of 2013, arguing that lawmakers passed an unbalanced budget when they rejected his spending plan last year.

“We have serious concerns about the completeness of the data we are getting,” said Rep. Peggy Rotundo, D-Lewiston, co-chairwoman of the budget-writing committee. “Pieces of the puzzle are still missing because (the Department of Health and Human Services) has not provided the details on the shortfall.”

Democrats also said that they have requested numerous answers from DHHS because the governor will only allow questions to be asked in writing.

Lawmakers on Wednesday also focused on LePage-backed savings initiatives, some of which may be falling short of projected targets. Millett indicated Wednesday that some of the initiatives were proceeding as planned but that lawmakers booked more savings last year than they could achieve.

Democrats have also been critical of management at the Department of Health and Human Services, which last year learned that it had lost $20 million in federal funding at the Riverview Psychiatric Center.

The full loss of federal funds at Riverview isn’t reflected in the budget gap because the state had already drawn federal money to fund the hospital for a portion of fiscal 2014. The state has since stopped drawing federal funds, which represent more than half of the hospital’s operating budget.

Millett said the state will need more than $8 million to hire additional staff, upgrade the building for security purposes and achieve salary parity to retain and attract nurses.

State officials are optimistic that a positive tax revenue trend will help balance the budget. In December, the state exceeded projected revenue by $28.1 million.

In addition, some of the spending items identified as a shortfall by the LePage administration are funding requests that the governor proposed last year but the Legislature rejected. Nearly the entire $3 million identified at the Department of Education is a funding request, such as $450,000 for a nonprofit designed to help at-risk students remain in school.

Meanwhile, the budget gap discussed Wednesday could widen if lawmakers can’t find $40 million in savings or new revenue to fill a pre-existing gap in the state budget. If they do not solve that problem, property taxpayers will likely feel the brunt because the $40 million will automatically come out of the state aid to municipalities. 

On Tuesday, the LePage administration criticized a provision in the $40 million tax break bill that would pull money from the budget stabilization fund – or rainy day fund – to help avoid the cut in municipal aid.

There is $59.7 million in the rainy day fund. However, the fund is a key metric for agencies that assess the state’s ability to repay state-issued bonds. Last year Moody’s Investor Service assigned the state a negative outlook, in part because it had a “minimal” rainy day fund. Rebuilding the fund would improve the state’s bond rating, according to Moody’s 2013 analysis.

Democrats say that avoiding the $40 million cut in revenue sharing is a priority. However, there has been little consensus on how to trim or eliminate any of the $1 billion that the state pays in annual tax breaks or economic development programs.

Geoff Herman, with the Maine Municipal Association, told the Press Herald earlier this month that he wasn’t optimistic because of an “increasing willingness for the state to solve its fiscal problems on the backs of property taxpayers.”

Darkening the outlook is the political calculations of an election year. Cutting revenue sharing last year was considered a non-starter in budget negotiations. This year, if the Legislature enacts cuts to municipal aid and it results in higher property taxes or a reduction in services, many residents wouldn’t likely feel the effect until 2015, when cities and towns adopt new local budgets.

By then the 2014 elections will be over and the new Legislature can blame tax increases on the previous Legislature.

Steve Mistler can be contacted at 791-6345 or at:

smistler@pressherald.com

Twitter: @stevemistler

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