AUGUSTA – Gov. John Baldacci unveiled a $5.7 billion General Fund budget Friday, saying his spending blueprint for the next two years was balanced philosophically as well as financially.

Flanked by a set of senior administration officials in his State House office, Baldacci told reporters he had taken pains to minimize reductions in services for needy Mainers while keeping down growth in state spending.

“I have really worked hard … to make sure that we’re maintaining eligibility, that services will be there,” Baldacci said.

At the same time, the governor noted that he had been able to include an additional $250 million in state aid to local schools and said 90 percent of that amount should translate into “direct, immediate property tax relief for Maine citizens.”

Proponents of higher state aid suggest that more money from Augusta would lessen the burden of local school costs for municipalities and their property-tax-paying residents.

As a special legislative committee gathered again Friday to discuss property tax relief in general, the $250 million boost in school aid that the governor is proposing was being characterized in some quarters as only a half-step toward meeting the mandate of a school funding referendum that was passed by Maine voters last spring.

Baldacci has maintained, however, that the state cannot afford to double the increase to bring the state share of education funding to 55 percent all at once. Initial legislative reaction to the Baldacci package, which was said to call for the elimination of 69 state employment positions and a review of 46 other slots, was limited as rank-and-file members awaited details. In advance of Baldacci’s announcement, sketches of major provisions of the governor’s plan began to circulate and legislative leaders received some level of description and explanation.

“Most importantly, this budget recognizes the priority of property tax relief. While I and everyone in the Legislature will have to examine the budget in detail to look at the funding sources, the governor has put the need for property tax relief front and center, and assured us that whatever proposal comes out of the Legislature will be paid for within existing resources. It’s hard to ask for more than that,” House Speaker John Richardson, D-Brunswick, said.

“I just think we’ve got an awful lot of looking still to do,” said House Minority Leader David Bowles, R-Sanford.

According to a Baldacci administration analysis, 47.5 percent of total General Fund appropriations being proposed – $2.7 billion – would go toward education, while 31.9 percent – $1.8 billion – were under the Department of Health and Human Services.

About $1.2 billion – 20.6 percent of total General Fund appropriations – would go for the remainder of state government, the administration said.

“As with every major piece of legislation, the governor’s budget is a starting point and the Legislature will now review and discuss and make its own contributions to the final product,” Senate President Beth Edmonds, D-Freeport, said in a statement.

“The governor appears to have come up with creative strategies to minimize the cuts that would otherwise be necessary to balance the budget, and still pay for property tax relief and provide vital services to those who need it most,” Edmonds said.

Baldacci told reporters his budget package carried an increase of merely 3.76 percent from two years ago. He also said an overall budgetary increase combining the new package with the last biennial budget amounted to just 3.5 percent and pegged that as the lowest General Fund average rate increase of any gubernatorial administration in the past 30 years.

“This budget does more to provide tax cuts and investment that will improve Maine’s competitiveness, broaden our economic base and create more opportunities for Maine people,” Baldacci said.

Among tax-cutting provisions Baldacci cited were: $225 million in property tax relief; $153 million in business machinery tax cuts; and $51 million in income tax cuts by eliminating indexing.

Maine Republican Party Chairman Randy Bumps issued a GOP reaction statement, saying: “To balance the budget by using gimmicks, one time revenues, increased user fees and delaying repayments to the state employee pension fund is disappointing.”

As he put forth his fiscal package, the governor emphasized positive economic indicators for Maine, including advances in per capita personal income and payroll employment.

Administration officials say that over the past year through November, the Maine economy experienced the net creation of 4,700 jobs.

Once faced with a potential shortfall of about $740 million, Baldacci is proposing to trade future lottery proceeds for an upfront payment by an investor.

The administration says capitalizing up to $40 million of lottery revenue for 10 years, based on net present value, could generate $250 million for the biennium and that one option could involve an investment by the Maine State Retirement System.

Maintaining a no-new-tax stance, the governor also is proposing to stretch out a state timetable for reducing Maine’s unfunded pension liability as a way to achieve substantial short-term savings.

A reamortization of the unfunded retirement liability – moving from a schedule of 14 years to 23 years – could be worth more than $135 million through fiscal 2007.

The governor is also being aided by the availability of $94 million in higher than anticipated state revenue that was projected for the upcoming budget cycle by the state of Maine Revenue Forecasting Committee in its Dec. 1 report.

The Baldacci package leaves the basic state sales tax alone but makes clear that casual rentals of living quarters are subject to it and delays an exemption for types of digital broadcast equipment.

The proposal would also extend a service provider tax to licensed private-pay residential care and assisted living facilities.

On the law enforcement side, one provision would make Maine’s required use of seat belts by motorists more rigorous.

“It is our hope that there is opportunity for Republican input during the budget process,” said Sen. Paul Davis, the Senate Republican leader from Sangerville. “It would be a great failure of the citizens of Maine if the governor and the Democratic majorities resorted to the same simple majority budgets from last session.”

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On the Net:

Proposed state budget; http://www.maine.gov/tools/whatsnew/index.php?topicGov+News&id4956 &vArtic le