With respect to Neil Young, the soundtrack to Maine’s budget is “The Gift Cards and the Damage Done.”

This state has a projected deficit of $95 million, with $38 million this fiscal year. Gov. John Baldacci, in response, is “curtailing” state spending to balance the current budget, with supplemental action in January for the remainder.

Many factors led to this deficit – downward sales tax revenues, low consumer confidence, escalating commodity prices, etc. The things that impact every household from Calais to Coburn Gore. There was another, however: the unused gift card fiasco.

To review: Maine expected national retailers to give about $28 million in unused gift card revenue to the state, pursuant to unclaimed property laws passed by a prior Legislature.

A bad choice, which looks worse when considering the retailers’ legal arguments against Maine’s effort: no less than three U.S. Supreme Court decisions are invoked, dating back to 1965, to contradict the state’s statute. Most companies let the law speak for itself.

Some went further:

“Maine’s statute simply acts as a ‘money grab’ for balances that belong to the true owners of the gift cards,” wrote Abercrombie and Fitch. Ouch.

The apparent conclusion is goggling – Maine budgeted $28 million from gift cards, despite four decades of legal precedent. Even if esteemed legal minds in Augusta felt the state’s position was defendable, they still should have anticipated resistance from the retailers’ legal departments.

Yet they booked the money anyway, almost one-third of this current shortfall.

The other 70 percent, or so, is comprehensible. The pinch of the subprime mortgage crisis, the credit crunch, prices at the pump and dreadful doldrums of consumer confidence are being felt coast-to-coast.

Taxpayers understand these concerns. The state is $5 million over its energy budget; show us a Maine homeowner who isn’t. When times are tough, we live within our means. State government must do the same.

Gov. Baldacci said this word-for-word. “We have more money going out than coming in,” he said. “We must live within our means.” Our confidence in this statement would be higher if it were not made in accordance with cuts to medical, mental health, childhood and elder services through DHHS.

The governor deserves credit for bold action. But he cannot sell the severity of this shortfall as stemming from outside influences, or cite the similar struggles of other states with oil prices and sales tax downturns.

Neither absolves the horrendous gift card decision.

Come January, lawmakers will be searching for further cuts. Maybe to the state work force, to the administration. It has been Herculean to find $10.1 million to cut through “streamlining.” Now there’s another $57 million, or maybe more, if the fiscal forecasts stay gloomy.

It’s certain this first cut won’t be the deepest.