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Good day.

Maine and the nation face an uncertain economic future.

The national economy is either in a recession or on the edge of one. Maine is not immune from the effects.

As serious as the State’s financial circumstances are, I know that Maine families are facing pressures just as great at home.

They are caught in the vice of high gasoline and high energy costs, rising inflation and insecurity. The housing market is stumbling along and the stock market is also unsteady.

We must rebalance government without adding to the burdens Mainers are already struggling to overcome. And we must be prepared, because our national economy could still get worse.

This week, I submitted a new round of cuts to the two-year state budget.

It builds on the changes I submitted earlier this year.

Since last year when we passed a two-year state budget, the State revenues pegged on that State budget have declined twice.

It’s now about $190 million short of its original target.

In addition, the federal government has reneged on its obligation by changing reimbursement rates for Medicaid, placing an added weight on the backs of Maine taxpayers.

For all the talk of stimulus from the federal government, we know Maine must find its own path through this crisis.

We must bring our spending in line with our revenues.

That’s why I am proposing a new round of spending reductions and it hits every part of State government.

We have worked diligently to mitigate the cuts to education, and we have looked for innovative ways to ease the impact on classrooms.

These cuts are painful to me, and I do them reluctantly. But given the national economic slowdown, we have no choice.

We have also tried to limit the impact of the cuts were proposing to health and human services, and to protect our safety net for Maine’s poorest, oldest and sickest.

Health and human services and education spending account for about 80 percent of the State budget. There is simply no way to reduce spending by $190 million without touching those areas.

There will be changes to Medicaid, which serves the State’s poorest.

There will be changes for seniors.

People will lose their jobs. State offices will close.

We’re cutting 71 positions, including 20 management and administrative jobs in health and human services and we’re reorganizing their central office.

We’ve maintained frontline law enforcement, and we’ve protected as many core programs as possible.

I’ve heard the stories from people who are losing important support from the State. They have reminded us all about the crucial responsibilities that the State fulfills.

I know the tears are real and the cuts painful.

But I honestly believe that Maine taxpayers are near the end of their capacity to pay.

The change package includes no tax increases, or no dipping into the stabilization fund.

We’re not out of the woods yet, folks. We won’t know until April just how bad things will get. We must be ready for bad news, and make sure we have the reserves to react.

As the economy stalls, the costs are growing beyond our ability to keep up.

Right now, we know that the fiscal strain we face this year and next is repeated in the next two years.

So, it is our responsibility to act today in a way that not only solves our short-term problems, but also puts us on the path of sustainability in the future.

We’ve put forward real reforms: less school administration, a unified corrections system and more efficient natural resources management.

These changes are absolutely necessary.

We can’t continue to waste money on outdated government structures.

We do so only at our own peril because our problems are only going to be more difficult to solve in the future.

There’s still reluctance in many quarters to accept reforms. But they must happen. Otherwise inefficiency will continue to rob resources from our children, from our sick and elderly and disabled and from our economic prosperity for a brighter future.

So, we have a responsibility to the people of Maine, and I know there are those out there working two and three jobs a piece just to get by. We don’t want to add to their struggles.

So I know that the reductions are difficult.

I know that is a responsible approach under very tough circumstances.

And I appreciate you listening and recognizing what we have to do together.

Thank you very much.

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