Memo to Department Heads RE: Spending Cuts
Due to the economic impacts of the COVID-19 pandemic, Maine state government will have to make significant fiscal changes for both the current year and the upcoming biennium. Governor Mills directed us to implement a higher level of scrutiny in fiscal year 2020 as a way to manage within anticipated resources. The Consensus Economic Forecasting Commission met twice in June and the Revenue Forecasting Committee (RFC) convened on July 29th. At their meeting, the RFC made substantial downward revisions to Maine’s revenue forecast. Per the RFC transmittal letter dated August 1, 2020, General Fund revenue projections are decreased by $528 million in FY21 and approximately $883 million in the 22-23 biennium. The decrease to the Highway Fund is $31 million in FY21 and $30 million in the 22-23 biennium.
Title 5 §1668 requires the Commissioner of the Department of Administrative and Financial Services to notify the Governor whenever it appears that anticipated revenues will be insufficient to meet authorized expenditures. In turn, the requirement for a balanced budget compels the Governor to pose a solution for the revenue shortfall. In this instance that solution involves the:
- Continuing emergency-basis scrutiny of hiring and spending considerations
- Reviewing resources available from all prior year unencumbered balances
- Reviewing resources available from all reserves and other available balances
- Additionally, we will be soliciting information from agencies for 10 percent General Fund and 5 percent Highway Fund cost reduction measures for FY21.
This information will be essential as the Administration considers curtailment options and these proposals will also help inform the biennial budget process as these percentages are equal to the percentage reductions required in the biennial budget (instructions to follow this email.) No departments or branches of government have been excluded from the calculation. Targets have been developed on an agency-wide level; it will be up to you to decide how to implement them across your programs.
There are several guidelines to follow when developing your initiatives. First, you may not propose to eliminate any program in its entirety; any reductions that the Governor makes in expenditures must be amenable to prompt restoration by the Legislature. You may not meet your target by reducing Internal Service Fund payments; those programs are subject to their own targets.
We have established an accelerated schedule for gathering this information so as to provide the longest period of time possible for the realization of savings. You will receive additional details of this process from the Bureau of Budget via email. All cost reduction initiatives must be received in the Budget Office no later than noon, August 19, 2020. There will be no exceptions to this schedule. We intend to work on the submissions over the three following days and use the 19th through the 21st to follow up with agencies and finalize the recommendations for cost reductions. We will be setting up a time to electronically meet with you to review your submission; thanks in advance for being available to us during that span of time.
In order to effectively assess and implement your initiatives, we will need as complete and accurate information as possible. We are providing a template to be used to submit the needed information. Please augment the template with additional narrative information and back up materials, as necessary. We are also asking that you summarize your proposals in a cover memo.
In preparing the Supplemental Budget recommendations for the Legislature’s consideration, we will either incorporate the curtailment initiatives you provide or replace those initiatives with alternatives that achieve the target savings but which require Legislative action for implementation. For example, program eliminations may be necessary to bring us back into balance. Such eliminations, though, may not be implemented via curtailment. If you want to put forward such a proposal, we will need a curtailment initiative and a “companion” Supplemental initiative to subsequently replace the expenditure reductions implemented via curtailment.
This will be a very challenging process for all of us and for those we serve. We appreciate your cooperation and willingness to provide us with the assistance and input we need to thoroughly inform the Governor and accomplish this difficult task.
Kirsten LC Figueroa
Department of Administrative and Financial Services