In April, when legislators trying to balance the state’s budget focused on a two-year-old fund to regionalize local government, few took notice.

“It’s defunct now, but I don’t think the state and the taxpayers can afford to have it be defunct,” said Rep. Terry Hayes, D-Buckfield. “Is it the best way to attack the problem of government spending? I don’t know, but what other weapons do we have?”

Hayes is House chairwoman of the state’s Intergovernmental Advisory Commission, which was created to encourage cooperation among different levels of government.

The state began collecting money in 2004 to encourage local governments to consolidate some of their operations, diverting a portion of the sales tax revenue normally distributed to local governments. That fund gave out $1.5 million in grants to 40 different groups over two years.

Another 27 grant requests came forward at the beginning this year, seeking the state’s help in creating their own money-saving regional groups.

In Lewiston-Auburn, the local sewer districts were looking for money to develop a mapping system and the water districts were hoping to pay for a wetland survey. The towns of Rumford and Mexico were hoping to study the feasibility of merging, and Jay and Livermore Falls wanted to develop a joint sewer/solid waste plan.

In all, local governments throughout Maine were asking for $1.3 million in grants.

But the money was gone, swept up by legislators and Gov. John Baldacci in the hunt for budget-rescuing revenue.

“When the general fund came up short, they were looking for any revenue they could,” said Hayes said.

It needs to be returned, Hayes said, or given back to the local communities some other way.

“This became a diversion of the towns’ share of sales tax revenue,” she said. “I don’t think that’s what anyone intended. And if it can’t be spent for regionalization, it needs to go back to the towns.”

She’d rather see it go toward regionalization.

“It’s still viable and appropriate to pay for it, even if the funding is somewhat diminished,” she said. “