Although things are better than they were four years or even two years ago. We are not out of the woods yet and still have major problems ahead to tackle. Bruce told the crowd of listeners that Maine for this budget still has a shortfall of $100 million that needs to be closed. It was explained how this was going to be accomplished.
Bruce explained how the Federal Government is borrowing for $16 trillion dollars. While the interest now is low it now consumes 40% of what we borrow. The worry is what will happen when those rates start to rise. This will affect Maine and how the state will be able to handle its budget. Because when rates rise for the Federal Government the services that will be squeezed out will be passed along to the states. Maine which is in a budget crisis as a result of spending beyond our means will have to make drastic cuts in order to balance what it spends with what is taken in.
For the next budgetary cycle starting mid July 2013 and running to July 2015 the state is facing a $800 million shortfall. How do we close this gap – where are the problems. Some of the areas that Bruce talked about were uncomfortable but needed to be addressed.
- Medicare is a huge problem. Federal reimbursement to the state is only $0.63 this is down from $0.73. Payments still have to be maintained to Hospitals. The state has balanced this portion of the budget in the past by not paying what was owed. To date the state owes for $480 million to the states hospitals.
- Revenue sharing will be reduced to 0% for this two year period (currently at 3.5%). There has been a 123% increase in property tax and it is expected there will be further rises. The state has no money for this program and towns have become dependent on this money to cover shortfalls. The money is drying up for the state and as a result money is drying up for towns from the state.
- School budgets are closely related to revenue sharing and represents a huge portion of any towns budget. Instead of looking for cost efficiencies towns will often vote on increasing budgets. Yet it was pointed out that budgets do not have to be passed all because they have been proposed. Bruce and members of the audience related stories of voting against budget increases. It requires grassroots action to do this. It was also recommended that we ask our superintendent of schools if they are purchasing insurance independently as example.
The point of these examples is that in the past we spent more than we took in. That the state relied on creative accounting to push off to the future what it could not pay for today. That we relied on Federal stimulus money to help cover other debts and program expansions. That creative accounting and stimulus money has either gone away or dried up and the state is faced with some hard decisions. It has only been recently that Augusta has had a backbone in trying to accomplish this difficult task. There is going to be huge debates on the budget in the up coming weeks. The legislature is going to try and kill tax breaks as a way to counter the hard choices the Governor is suggesting. It is agreed that everyone is going to be affected but how the citizens will be impacted is going to depend on how the budget is passed. The Governor is trying to pass it so that it will have a minimal of impact on everyone. The worry is that special interest groups will start to carve out areas to protect so that in the end the burden will fall on fewer and fewer people. Let your representative know that it is time to get our house in order and work with the Governor.
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