Maine State Senator Peter Mills





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Articles By Peter Mills

Budgets and Porridge

State spending by itself is just the "Mama Bear porridge pot". The bigger Papa Bear pot is the one that includes not only state money but also the combined revenues of 491 towns, 286 school units, 3 Indian tribes, the Unorganized Territories and 16 counties. When you add them up and net out the overlaps, it comes to $5 billion in spending from state and local revenue. In addition, Maine receives and allocates about $3 billion of "other special revenues," primarily federal matching money for Medicaid and highways.

If we put the entire cluster of state and local services (roads, schools, law enforcement, fire protection, courts, Medicaid & welfare) out to bid, even Halliburton could probably do it for less than the $8 billion we are spending. That's 18% of the state's gross domestic product. It's $6200 per person.

The question is not whether this porridge bowl is too big. The question is how to make it smaller while producing services of equal or greater value to receivers.

It does not mean abandoning local control, but it must mean making informed decisions about where control best resides. I know instinctively that Myron Moody, the road commissioner for Cornville (pop. 1200), maintains roads at a cost per mile that is far less than what the DOT spends. Myron and his one man ditching crew seem to make as much progress in a day as any larger state crew. Unfortunately, I don't know how much the difference is; I don't know how much the state may be hampered by additional regulations; and my instinct relative to cost might possibly be wrong because I can have no data to verify my judgment.

Representative David Trahan has been fighting for years to create an office of accountability (OPEGA) that would be tasked to do analysis of this sort. I go further. I think every governmental manager should be directly accountable for the costs and benefits of the services that manager controls. The analysis should be public and it should form the basis for budgeting. We need to pay for performance the way private businesses do.

We can begin by pulling together a readable summary of much is spent on the total of state and local services. The next governor should produce on one or two pages a combined operating statement aggregating revenue and expense. This has never been done. Our failure to do so is like General Motors failing to understand how much money it makes or loses while focusing only on the Oldsmobile division. State policy makers have no handle on the composite burden. The U.S. Census Bureau does periodic sampling and produces estimates, but everyone says their estimates are wrong.

Last year, I put in LD 900 to develop a composite report. It was the only bill under my sponsorship that the Democrats allowed to pass after we started the People's Veto campaign against $447 million in borrowing (the Don't Mortgage ME effort). LD 900 was greeted with enthusiasm by the Auditor and the Planning Office and progress is being made.

There is no question that we overspend for what we receive. We have many regional duplications and few departments focused on results. Responsibility is too often collective, which means there is no one to reward or blame. Governor Baldacci has famously given up on reforming regional duplications and Governor King was frustrated in his efforts. The next governor should get elected on the basis that the people want these problems tackled. Let's get it done.

In regard to the state budget by itself, the dominant area of discretionary cost is in social services. To save real money requires revamping the way DHHS does business as described in my Twelve Step Program. In the near term, the state can achieve savings by:

  1. limiting Medicaid enrollment where permitted;
  2. reducing optional Medicaid benefits;
  3. increasing co-pays and premiums under S-CHIP;
  4. more aggressive asset testing where permitted; and
  5. rationing services for childless adults ("non-categoricals") to fit the money appropriated.
None of these measures will save as much as people hope, but each is worth considering while implementing larger solutions. Our statewide work force has 41% more people in health and social service employment than is the norm for the United States. This service component, which is heavily dependent on public financing, is also the fastest growing sector of Maine's economy. It needs aggressive management.

The state budget for the next biennium should be based on a tax structure with a maximum personal and corporate income tax rate of 7.8%. State tax law should include conformity to medical savings accounts, to the federal estate tax uniform credit, to federal depreciation incentives and to the federal deduction for 179 property. It should also be based on rolling back exorbitant license fees imposed by the Baldacci administration in detriment to small businesses all over Maine.

The state of Ireland put itself through hell before becoming what it is today, the second richest country in the European Union. A similar transformation is possible for Maine, but it may take years to accomplish.

No governor can expect to get it done in four years or even eight; but I would like to get started in my lifetime by setting up the systems that will enable Maine people to succeed.

It means building accountability into everything we do. It means funding outcomes rather than outputs, product rather than process. It means tracking progress every day at every level. It means managing for results in social services and education. It means transforming people's perceptions of government.

Peter Mills