“Cuts Only” Approach to Maine’s Projected Revenue Shortfall Is “Counterproductive” and Could Undermine State’s Economic Recovery

Calls for fiscally responsible approach to budget balancing that maintains critical services and investments important to growth and prosperity

Augusta, Maine (Friday, October 15, 2010)—A new analysis released today by the Maine Center for Economic Policy (MECEP) concludes that a ‘cuts only’ approach to the state’s projected $1.17 billion revenue shortfall, embraced by a number of advocates this election season, “is counterproductive and has the potential to undermine economic recovery.” The publication, “Maine’s Balancing Act: Maintaining Services, Investing in the Future,” was written by MECEP Associate Director Garrett Martin and MECEP Fiscal Policy Analyst Dan Coyne. It is the latest edition in the long running MECEP Choices series which published its first report in 1994. 

“Maine’s very economic future demands a fiscally responsible budget balancing act that maintains critical services and provides for infrastructure, education and other vitally important investments,” Martin and Coyne write.  “To ensure that Maine is a place where people can raise a family, start a business and reach their full potential, our post-election discussions must include all the options essential to resolve a situation Mainers didn’t cause but desperately need help to overcome. We must have a balanced approach that includes raising revenues to ensure that Maine families will share fully in a reinvigorated economy.” 

Martin and Coyne emphasize that Maine’s revenue shortfall is largely the result of the Great Recession caused by 30 years of unsuccessful national economic policies and the failure of the federal government to effectively regulate catastrophic malfeasance on Wall Street and in the real estate market. They also raise an alarm about potentially grievous jobs losses that would result from the wholesale budget cuts. In January 2009, MECEP research demonstrated that a proposal to cut $275 million from the state budget then pending would have resulted in a loss of 7,000 to 10,000 public and private jobs. With the help of timely federal assistance, Governor John Baldacci and a bipartisan majority of the Legislature agreed to avoid such extreme cuts yet balance the state’s budget. The new MECEP report concludes that cuts suggested on the campaign trail would result in far greater job losses. 

“The last thing our economy needs is more people out of work,” Martin and Coyne assert. “Slashing over $1.1 billion from the budget for 2012-13 could cost as many as 25,000 lost jobs. With more than 100,000 people already unemployed or underemployed in Maine as a result of the recession, such additional job losses would be devastating and take years to recover.” 

The report cautions that because most state revenues fund salaries, contracts, and purchases, drastically reduced state spending during a recession will have a “ripple effect” of private sector job losses. The authors urge continued cooperation by the public and private sectors to spur needed economic growth. 

“Business and household success requires effective, efficient public spending in areas like education to prepare future workers for the high-skill needs of growing employment sectors,” the report adds. “Growth depends upon the public sector and private sector working together. The importance of public sector investment is especially great when the private sector falters, as it has during the current economic slump.”