April 29, 2013- Further Votes & Revenue Forecasting

UpDate on the Appropriations Committee Work Session – April 29, 2013


The Appropriations Committee convened at 10:00 AM and voted to approve two budget proposals regarding the Blind and Visually Impaired, proposals regarding veterans services and military training and operations, and a position within the Office of the Attorney General.    The Committee also approved limited period and position trans within the court system.


The Appropriations Committee also received a briefing from Michael Allen, the Associate Commissioner and economist for Maine Revenue Services in regard to the Revenue Forecasting Committee’s [RFC] latest revision to State revenues.   The RFC revised General Fund revenues upward in FY 2013 by $44 million and downward in the 2014 and 2015 Biennium by nearly $62 million.   According to Dr. Allen, the Revenue Forecasting Committee reforcasted revenues as follows:


Fund                            2013                      2014                               2015


   General Fund               $44,106,265            ($34,373,483)              ($24,329,748)

   Highway Fund              ($  3,460,153)          ($  3,877,242)              ($  3,966,383)

   Healthy Maine Fund    $1,512,073              ($     474,118)              ($     381,995)

   MaineCare Taxes        ($1,098,071)            ($  1,098,071)              ($  1,098,071)


            The leading loss leaders of the General Fund include the Sales Tax and the Corporate Income Tax.   Revenues from both taxes have been reforecasted downward in ever increasing amounts through FY 2017.   The Consensus Economic Forecasting Committee reprojected its economic forecast to project slower, economic growth – even negative to flat growth over the two most recent quarters.    Reasons for the economic and revenue reforecasts include:


§  Expiration of the Investment tax credit and Section 179 expensing [accelerated depreciation,

§  The ability of business to carry forward net operating losses forward,

§  The faltering economies in Europe, and

§  Slow economic growth in the United States


Meeting with Richard Rosen – Executive Director of the Office of Policy & Management


            Appropriations Democrats met with Richard Rosen in regard to the role of OPM in balancing the budget.   The Governor’s Biennial Budget proposes that the Office of Policy and Management find $10 million of savings in FY 2014 and $20 million in FY 2015.   The OPM is funded for 7 positions, but only 6 have been filled.   Four of the positions were established by financial order, and the budget officially accepts these positions as part of the baseline.


            The OPM will take a system approach, including one time savings to generate $10 million.   The $20 million of savings will come from structural changes, and OPM will look at each agency’s  zero-based budget to find more savings.


            OPM is also charged to propose the elimination of a total 100 positions from all revenue sources for savings of $3,750,000 over the 2014-2015 Biennium.   Appropriation’s Democrats question the need for the elimination of the positions along with the proposal to increase the attrition rate to 6 percent.   The answer from OPM is clear – reduce the size of state government!


            OPM is also reviewing indigent defense funding needs and will report its findings in September 2013.

DHHS Baseline Budget


            DHHS reported last Friday, April 26, 2013, that it has spent two years attempting to get control over its MaineCare baseline budget.   The department adopted the Holt Winters Forecasting Logarithm to establish a baseline budget that the department hoped will address the constant upward revisions in the DHHS budget and the many supplemental budgets that have plagued the Legislature.


            DHHS claims that the projected baseline for FY 2014 is $139 million under the funding level needed to adequately fund MaineCare, and $153 million below the needed level of funding in FY 2015.   The depressed baseline is blamed for the problems in funding MaineCare.


            A discussion with OFPR however, indicates that the model and data used by DHHS is data to which OFPR has access.   That data, however, is not sufficient, in the opinion of OFPR.   The model proposed by DHHS:


§  Mixes Other Special Revenues with General Fund dollars,

§  Backs out some very substantial program funding,

§  Doesn’t indicate who or what is in and who or what isn’t included in the Baseline budget,

§  Changes data input for some programs,

§  Applies the match rate at the end of the model, when it should be applied at the beginning of the model,

§  Is not organized into groupings, such as hospitals, and other categories, and

§  Other problems.


            The basic or root cause of the problem with DHHS funding is the cuts that are made to programs to produce savings.  The cuts are made, but the spending stays the same.  The savings are never realized.   Savings estimates are wrong, and some cannot be achieved.


            The model is made much more difficult and complicated by an entirely new system of funding hospitals, incorrect cross-over payments, uncollected cost-of-care, and other issues.



Inland and Fisheries Wildlife Budget


The Appropriations Democrats reviewed the Inland Fisheries and Wildlife General Fund Budget, which contains:


§  28 line items,

§  4 Language parts, and

§  3 new initiatives


The Appropriations Democrats approved 21 items, tabled 7 items, tabled the three new initiatives, and tabled two language parts.



To date, the Appropriations Committee has reviewed 790 line items and roughly 50 language parts.    The Committee has voted in 365 line items.


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