This state is in trouble. Even with the highest tax rates in America, Maine can’t pay its bills. Rating agencies will soon downgrade our bonds because the governor is selling valuable assets to meet current expenses. It began by selling the state’s liquor business. We got $125 million for it, spent the money and gave up $26 million in annual revenue for a 10-year term.

The governor also made a standing offer to give up sales and income taxes to any new company that enters a Pine Tree Zone. Meanwhile, our older companies are paying the state more than ever through increased fees, fines and other newly imposed costs.

The budget enacted in March sells off the lottery for 16 years and spends most of the money to sustain current services. The worst thing we can do in these cash-short times is to borrow $447 million on a 16-year bond (without public approval), spend the money and suffer annual payments of $44 million for many years to come.

Proponents of borrowing say the money will be “invested” in our future by paying for education and health care. Although these are worthy causes, they are not “investments.” A bondable investment is one that creates something tangible to use for many years.

Education and health care are supported through wages paid to those who teach children or care for the elderly. These are vital current services, but they are not investments. They are a recurrent expense, the daily business of state government. When the bill for such services is paid for one year, a new and often higher bill comes due for the next.

The structural control of these programs is a major challenge for state government. Unfortunately, too often we fail to manage; we succumb. As one person put it, the state’s posture is one of “invertebrate surrender.”

In recent budgets, state employees got a 6.1 percent biennial raise, a 27 percent increase in travel allowance and a guarantee of health retirement benefits, the same kind of guarantee that is strangling growth at Ford and GM, whose bonds were just downgraded to “junk.” State employee unions have an open checkbook from this administration.

However, the state’s financial crisis had its genesis in more than poor management alone. Our population includes a disproportionate number of dependent people. That’s a demographic fact. Maine’s average household income is low, not so much because wages are low, but because we have so many citizens who cannot work at all because of age, illness or disability. Among those eligible to work, our unemployment rate is actually below the national average.

Some legislators claim that we can solve the budget gap entirely through reductions in spending. Emotionally, I agree, but politically, it can’t happen.

About half the state’s budget is spent on education, the other half on social services. Because the Maine Municipal Association referendum that passed last June required major new spending for local education, it removed from the table any thought of reducing recent allocations for education and property tax relief. Too many towns are already disappointed by the “dead cat bounce” of L.D. 1, the state’s tepid response to the MMA referendum.

That leaves the burden of cuts to fall on social services. Our coming biennial budget (July 2005 through June 2007) can probably be balanced with total adjustments of about $300 million. Cutting this money entirely from social services becomes nearly unthinkable when the reduction is magnified by the loss of another $600 million in federal funds, which typically match the state’s contribution.

Nevertheless, there is room in this budget to find $100 million in structural cuts. It won’t be pretty; but it can be done. Because neither political party will take responsibility for such cuts, they can only be enacted by compromise and concerted action of the sort that takes place when both sides invest in the outcome. We need a two-thirds vote.

That leaves the remaining $200 million to come from revenues, which are no easier to generate than the concomitant cuts. Any revenue increases ought to be temporary and self-terminating to keep pressure on the state to make structural changes within existing tax streams.

Let’s give the Appropriations Committee the job of finding $100 million in budget cuts. At the same time, tell the Tax Committee to generate $200 million in taxation surcharges to be imposed and rescinded within the term of the present Legislature. That’s an adult response to the pending crisis. Maxing out our credit cards is not.

State Sen. Peter Mills, R-Cornville, is an 11-year veteran of the Maine Legislature and a sponsor of http://www.dontmortgageme.com.

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