AUGUSTA (AP) – The Baldacci administration on Monday released figures showing a brighter fiscal forecast for the next two-year state budget, with the gap between anticipated revenues and expenditures shrinking by more than $50 million.

New estimates released by Finance Commissioner Rebecca Wyke show a $785 million structural gap that loomed over the 2006-07 budget cycle trimmed to $733 million. The figure is expected to be adjusted further as the 2005 legislative session draws closer.

The new figure represents an even sharper drop from the $900 million structural gap that was estimated early this year.

“I think we’ve made a lot of progress and I think we’re continuing to make progress, and at the same time we still have more work to do,” said Gov. John Baldacci.

The administration revised its fiscal assumptions after receiving current services budgets from the individual state departments for the next two-year budget cycle, which begins in July 2005, Wyke said.

The $733 million shortfall includes a portion of the roughly $250 million needed to fulfill the state’s obligation to provide 55 percent of public school funding. Voters in June approved an initiated referendum calling for the 55 percent funding level, up from the current state share of 42 percent.

Health coverage for state employees and costs associated with the Maine Care program are also major factors in the gap, the administration’s top finance official said.

Baldacci, viewing Maine’s fiscal challenges within the context of two budget cycles, said the $733 million represents nearly a halving of the structural gap the state faced two years ago. “We’ve made significant strides from where we were before,” he said.

Structural changes within departments helped to stretch revenues without a broad-based tax increase during the last budget cycle. Departments were flat-funded and a number of one-time revenue enhancers, such as the sale of the state’s liquor business, were also put in place.

Even with the $733 million gap remaining, Baldacci sees no need for a tax hike.

“There’s no question about it,” the governor said. “There won’t be a tax increase in order to balance this budget.”

The ranking Republican on the Appropriations Committee, Rep. Richard Rosen of Bucksport, said the new figures continue to validate “what we have known since last spring. The next Legislature is going to face a pretty serious structural gap.”

Rosen, a state Senate candidate, added that he’s disappointed there hasn’t been more discussion in Augusta and in legislative campaigns of how to close the gap.

Baldacci said he is optimistic that revenue forecasters will come out with figures showing income growth, which would narrow the gap further.

“These indicators are moving in the right direction,” said Baldacci.

The figure is expected to be adjusted further as the next legislative session draws closer, Wyke said.

“I think it will fluctuate but I don’t think it will be drastic,” she said.

AP-ES-10-18-04 1806EDT

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