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Good morning. This is Governor John Baldacci.

Because of the deepening recession and a slowing economy, I had proposed a plan to close a $438 million budget gap.

The plan included many difficult decisions and significant reductions in spending.

Since that time, my administration has worked with the Legislature to make improvements and consider alternatives.

We have an opportunity to address some of the most challenging issues that have been identified.

Over the past three months, our state’s revenue forecasters have seen positive indicators in the economy to slightly upgrade our financial outlook for the next year and a half.

They tell us we can expect revenues to increase by about $51 million dollars.

It’s a conservative estimate, and the forecasters have been very cautious.

In addition, the federal government has made an administrative change in MaineCare reimbursement.

That change translates into about $28 million dollars in resources for the State.

Even with the new resources that are available today, this budget is still very constrained.

For context, my first budget in 2004-2005 was $5.4 billion dollars;

This proposed budget seven years later, even with restorations, will be just $5.6 billion.

Despite today’s good news, we know that our economy remains fragile and that recovery is far from certain.

We must protect and encourage economic recovery, and take no action that would jeopardize growth.

We must safeguard our core values and safety net, so the most vulnerable in our society receive the care they need.

And we must make structural changes so that our State is better prepared for economic recovery, and that the size of government better matches available resources.

I have placed a high priority on finding a bipartisan and cooperative path through these troubled economic times.

From the beginning, I have been committed to presenting a fiscally responsible plan to balance the State budget.

The slight improvement in the economy and the increased assistance from the federal government will allow us to address legitimate concerns in human services and education while also making investments in Maine’s long-term fiscal health.

My plan restores $30 million dollars in health and human services, including increased support for:

• Nursing homes;

• Assisted living facilities;

• Disability services;

• Mental health crisis intervention; and

• Home-based services.

It also identifies alternatives to earlier proposals that will help bring Maine’s budget into balance.

The plan restores $20 million dollars for K-12 education in 2011.

By restoring this, we’re helping communities to be able to transition to declining revenues in the future.

Eight million dollars for the University System, Community Colleges and Maine Maritime Academy.

The plan includes a $6 million dollar restoration in municipal revenue sharing to help communities weather the recession.

Other initiatives in the budget I introduced include:

• $3.5 million dollars to reduce the State’s obligation for retiree health benefits;

• $8.1 million dollars to eliminate a proposed delay in State employee pay;

• $1.75 million dollars to fund the State’s obligation for disaster assistance to local communities.

With these proposals, I believe we can give school districts and municipalities time to adjust to declining revenues, protect our core values and the State’s economy.

I am also including a number of savings initiatives in this package that will reduce costs going forward, particularly in the Department of Health and Human Services.

We must continue our push to make government more efficient.

To that end, it is important to replace the one-time payroll delay so that the obligation isn’t passed on to the next administration.

It’s also prudent for us to pay down our obligation on retiree health and to fulfill our commitment on disaster assistance to local communities.

By addressing these obligations now, we reduce the State’s structural gap going forward.

Even with these changes I’m proposing, this is still a very difficult budget.

There are still many hard decisions that must be made.

But during this difficult economy, I will not support higher taxes.

Maine families and businesses cannot afford a greater burden.

But I do support targeted investment.

We have an opportunity to put people back to work, to create jobs and grow our economy.

My budget plan includes the finances to support the debt service on a jobs bond.

The investments will focus on those areas where we can put people to work quickly and have a lasting impact on our State.

I expect to release the details of my plan early next week.

As I work with the Legislature to finish this budget, I will do everything I can to promote growth and prosperity, to help the middle class, and prepare our economy for the future.

We’ll make the tough choices today that will translate into opportunities tomorrow.

Thank you and have a great weekend.

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