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Good morning. This is Governor John Baldacci.

This week, State departments and agencies submitted ideas for a new round of budget reductions.

No final decisions have been made about what I will present to the Legislature in December, but many difficult choices are ahead.

Maine’s economy remains in flux, and we are preparing to make tough decisions to keep the State budget in balance as required by law.

Our State has shown that we are able to balance our budget without raising broad-based taxes and with overwhelming bipartisan support.

And we have cut spending dramatically.

And we have exercised the fiscal discipline necessary to protect the most vulnerable, make smart investments and fund K-12 education.

We know that in this time of economic stress, Maine must have a solid foundation from which we can grow.

In the spring, we passed a two-year, bipartisan State budget that is $500 million less than its predecessor.

But now, it seems almost certain that we will have to cut more.

My administration is working with the Appropriations Committee and the Legislature on ways to further reduce State spending.

While our situation is serious, I’m not going to raise broad-based taxes to balance the budget.

To put things into perspective, my first two-year budget was roughly $5.4 billion dollars.

Of that, almost $700 hundred million dollars per year went to education.

Before it’s all said and done, our budget this year could be close to that same amount.

But now, in 2010 we are budgeting more than $1 billion on education while enrollment has continued to decline.

We’ve made the most of this investment because voters said, at the ballot box, it was their priority.

To get there, we have reduced the State workforce by about 1,000 positions, or about 8.8 percent of the State workforce.

We have combined State departments and agencies, and improved efficiencies throughout government.

We have cut and restructured, and then cut some more.

Our children deserve the best education.

And we’ve have worked diligently to make sure that scarce resources get into the classroom.

That’s where they do the most good, supporting teachers and their students.

We must also continue our efforts to streamline State government.

We will set priorities and live within our means.

We recognize that Government can’t be the answer to all problems.

But government can ensure a foundation for success by enacting good public policies.

With the Legislature, we’ve been able to:

Expand Pine Tree Zones, enabling more existing Maine businesses tax benefits for their expansions.

Lowered the State’s top income tax rate from 8.5 to 6.5 percent for people making less than $250,000 a year.

We’ve invested in areas that will result in future returns for businesses through research and development, quality places and transportation bonds.

We’ve provided funds for industry cluster development through the Maine Technology Institute.

We’ve repealed the Business Equipment Property Tax so that new investments in business equipment will not be taxed – this helps our businesses to expand and to hire new employees.

And we have controlled spending while making crucial investments to create sustainable, private sector jobs.

These initiatives will help create good-paying jobs with benefits.

Education and human services account for about 80 percent of the State budget.

In both areas, we’ve made important structural changes and improved efficiency.

Every state in the nation struggles to control health care spending and the cost of their Medicaid program.

During tough economic times, more people turn to these programs for help, putting even greater pressure on limited resources.

As we look at the steps other States are taking, we see that Maine has led the way in constraining costs.

We have held growth in Medicaid to less than 3 percent, which is well below the national average.

And we have done it while maintaining the core of our safety net.

Good government takes hard work, and Maine people have been doing it.

And we will continue to create opportunities with public policy that:

• Invests in our people;

• Builds infrastructure;

• Focuses on key sectors of Maine’s economy; and

• Creates a fair and stable business environment.

It’s all about jobs and expanding opportunities for Mainers.

It won’t be easy and it won’t happen overnight, especially during this challenging budget environment.

But working together, we’ve demonstrated our commitment to Maine values of good government and fiscal discipline.

The steps we have taken to lower the income tax rate, to improve business incentives and to safeguard our economy will leave us in a stronger position for recovery.

Thank you, and have a safe and happy weekend.

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