With just about every state in the nation facing record-breaking budget shortfalls, no-one really knows what the “new normal” will be in state fiscal policy. With tax revenues substantially down and unemployment up, fiscal coffers are not going to fill up anytime soon. The economic heyday of the last few decades is over. Treading water or putting our heads in the sand until the good times return is a disservice to the people of Maine. It’s time to put our fiscal house in order and lay the foundation for Maine’s future.

It’s really unlikely that Maine people will accept a “new normal” whereby policymakers “solve” revenue shortfalls with only deep cuts to essential public services like schools, higher education and property tax relief. This is recession-fighting policymaking with one hand tied behind your back. This approach to tackling a budget shortfall only reinforces the economic crisis and does little to speed recovery and position Maine to prosper.

In times of economic uncertainty with workers unemployed or fighting to keep their jobs, families spend less and, if possible, save more. The decline in spending and increase in saving results in declines in state revenue, which is heavily dependent upon income and sales taxes. The decline in state revenue then usually results in cuts to state budgets, which fund critical programs such as those that provide health care, education, and workforce development. The shrinkage of essential services results in less support to workers and families who are struggling to get by. And the cycle repeats itself.

Unfortunately, this cyclical problem is a reality in Maine. Consequently, despite adoption of a biennial budget approximately six months ago that witnessed deep cuts to critical programs that support Mainers, Maine once again must make difficult choices to address a $438 million revenue shortfall. The proposed supplemental budget, however, does not really make meaningful choices. By calling only for more deep cuts to important public services, it’s pitting Maine families with some needs against Maine families with other needs and not doing anything to create a stable economic future for Maine.

For example, the proposed budget reduces higher education investments by $15.9 million, including funding for the Maine Community College System and the University of Maine System, thereby limiting Mainers’ ability to acquire new skills and advanced degrees. The proposed budget lowers the income eligibility limits of the Circuit-breaker program for single member households from income of $60,000 to $36,900 or less and for households with two or more members from income of $80,000 to $49,200 or less. The proposed budget also aims to reduce Department of Health and Human Services funding by $67.8 million, which will lead to decreased access to services for many, including the elderly.

Of course, inefficiencies in the provision of government services should be addressed, but pitting health care, education, and other worthy programs against each other to see which is cut less, which more, is not really a choice that protects Mainers or positions Maine to recover. Appropriate government spending works. The American Recovery and Reinvestment Act has created jobs and kept roughly 22,000 Mainers out of poverty. (Hopefully, Congress will soon pass a “jobs” bill that includes additional fiscal relief for states).

History also suggests that a cuts-only approach is not the panacea. Governor John McKernan, for example, proved that comparable shortfalls could be successfully combated with a balanced approach that not only cuts government spending but also increases revenues.

The Legislature should consider short-term, emergency revenue increases, which would sunset when Maine recovers, to combat this shortfall. Two possible options include a surcharge on income taxes paid by those with annual incomes over $250,000 and sales tax increases on items or services used most often by higher income households. The result would be additional revenues to help cover the budget shortfall, with the burden for the revenue increases placed on those who are most capable of shouldering it. Any potential increased tax burden on low, moderate, and middle income taxpayers could be mitigated with a refund through the state income tax and an expanded Circuit-breaker program.

More than ever, Mainers need strong public investments in health care, higher education and workforce development. It is time for the Legislature to pass a supplemental budget that adopts a balanced approach that makes some difficult decisions on spending but also considers temporary, emergency forms of revenue increases, the burden of which will be borne by those who can handle it. We need a balanced approach to balancing the budget if we’re ever going to recover and prosper.

— Dan Coyne is a fiscal policy analyst for the Maine Center for Economic Policy.