RECOVERY ACT INTERFERES WITH STATE BUDGETING

Bangor Daily News, ME - State lawmakers grappling with increasing budget shortfalls learned that federal law will greatly limit what cuts they can make to Maine's two largest agencies - Health and Human Services and Education. Combined, the two agencies make up about 80 percent of the state's general fund budget.

"There are clearly restrictions in different areas of federal laws, both normal federal law and the Recovery Act, that will prevent, or slow us down in making substantial reductions in some of those areas," Finance Commissioner Ryan Low said. "It is a challenge we are working through right now."

Under the American Recovery and Investment Act of 2009, the state will lose federal stimulus money if it allows general purpose aid to education funding to fall below 2006 levels. Education Commissioner Susan Gendron said the state has already told local school districts to expect $74 million in cuts over the remainder of the two-year state budget based on a previously projected revenue shortfall of $200 million. The estimated shortfall has since grown to be as high as $400 million.

"We can cut about $15 million more [than the $74 million] and stay within the federal requirements," she said. "Any more than that and we will lose federal funds."

Gendron said the federal law does allow a state to apply for a waiver to allow for deeper cuts, but she is not sure how the request would be received by federal officials. Low said no decision has been made whether to apply for a waiver, but it is an option being discussed.

"There are other agencies that also have similar restrictions on Recovery Act funds," Low said. "We are looking at all of that as we work on the supplemental budget.". . .

Health and Human Services Commissioner Brenda Harvey told members of the Legislature's Health and Human Services Committee that her agency is limited by long existing spending requirements to state programs receiving federal funds as well as by the Recovery Act.

"We have been going through all of the programs we provide," she said, "and we are greatly limited in what we can cut because of the federal requirements."