As negotiations continue in Augusta over the Part II budget, lawmakers have been delivered an opportunity from an unlikely source.

News that three military facilities in Maine – accounting for about 7,000 jobs – are on the Pentagon’s list for closure or reduction. The potential loss, which would deal the state a significant financial blow, creates for Gov. Baldacci and Republican and Democratic leaders in the Legislature a chance to step back from entrenched positions, to re-evaluate the state’s fiscal position and to look anew at a controversial borrowing provision included as part of the majority-approved Part I budget OK’d this spring.

To boil it down to its essence, Democrats passed a budget that borrows about $250 million to pay for increased school funding mandated by referendum last year. The borrowing became necessary because no alternative could gain the necessary political traction to garner a majority of legislators’ support.

Baldacci took tax increases off the table, while Democrats and some moderate Republicans were unwilling to cut more from social services. Republican leaders, feeling shut out by the budget process, demanded more cuts in government spending without providing the specifics necessary to construct an actual budget. That left the state with borrowing.

After the budget passed, a group of reasonable Republicans, led by moderates Sens. Peter Mills and Karl Turner launched an unreasonable “people’s veto” campaign to cancel the budget. Already, the state is paying a price for the uncertainty created by the political maneuver.

Although not the motivation we would have sought, the bad news of the base closures gives everyone the chance to step back and consider new alternatives. Mills has broadly outlined a plan that would combine an additional $100 million in program cuts with a temporary increase in the sales tax that would raise another $200 million.

While the governor has maintained his position opposing increases in broad-based taxes, he has room to move on other ideas, like higher taxes on cigarettes and alcohol.

Increasing the tax on a pack of cigarettes from $1 to $1.50 would raise an estimated $35.5 million. Tax increases on liquor sold in bars, wine sales and on rental cars could raise another $10.5 million. That’s short of the $200 million mark proposed by Mills, but gets the state closer. The rest could be made up by eliminating some of the current exemptions to the sales tax.

According to Sen. Ethan Strimling, if all the current exemptions were dropped – including the one on food – the state could raise about $1.8 billion in revenue. We would be reluctant to support a sales tax on food, but the numbers show that there’s opportunity for enhanced revenue by broadening the sales tax.

No one is enamored with the idea of state borrowing to fund the increase in education spending forced by referendum and enacted in L.D. 1. But the political reality is that, with the race for the governor’s office next year, neither Republicans or Democrats in the Legislature nor the governor was willing to compromise enough for a deal.

The winds are blowing the right direction now for a compromise. Circumstances have changed, and for the worse, in Maine. Now would be a good time for a deal and a united effort to improve the state’s financial position in anticipation of the fight over the proposed impact on the three military facilities.