BY MICHAEL SHEPHERD

Staff Writer

“In 2000, Angus King had a budget surplus of over $300 million, but he left office with a $1 billion shortfall.” — Statement from National Republican Senatorial Committee on Republican, Democratic Senate primary wins in Maine

Link: www.nrsc.org/2012/06/nrsc-statement-background-on-maine-senate-race/

Expect to see these numbers again as we push toward November and Republicans try to portray King as a fiscal liberal and closet Democrat. The national Republican group’s figures are rounded but fair, but the statement lacks important situational context.

The last half of King’s second term as Maine governor was perilous financially, leaving his successor, John Baldacci, with an unenviable situation. A document provided by Grant Pennoyer, director of the Maine Office of Fiscal and Program Review, shows a $320.6 million projected surplus going into fiscal year 2000.

Pennoyer said that projected surplus — the last one in Maine and the first since 1991 — came after the state couldn’t keep up with capital gains projections during the dot-com boom of the late 1990s.

“We kept under-projecting,” he said. “We’d revise it upwards and it would exceed our projections each time. That largely was the cause of the surplus.”

After additional spending and extra revenue, the projected surplus settled at $295.3 million. As the independent governor and the Legislature were planning the budget for the 2002-03 biennium, Pennoyer remembers King issuing a challenge.

“I just remember Gov. King trying to hold the line and that the Legislature was figuring out how to spend the surplus,” Pennoyer said. “He said, ‘I will not accept anything that will produce a structural gap of more than $300 million (in the 2002-03 biennium).’ And that was the battle.”

The document shows that in the 2000-01 biennium, the Legislature spent all but $1.2 million of the $362.8 million surplus, mostly in the 2001 fiscal year.

“The Republicans were proposing some fairly sizable tax reductions; the (Democrats) were proposing some additional spending,” Pennoyer said. “So it was all sides involved.”

Among other things, lawmakers spent $58 million on filling a state Medicaid shortfall, more than $34 million on construction and repairs and $33 million on new tax breaks.

Before the 2002-03 biennium, the state projected a budget gap of more than $256 million. But then the 9/11 attacks ravaged world markets. “It was a couple years of very lean income afterwards,” Pennoyer said.

For the 2004-05 biennium, the state projected a $958 million budget gap, another document shows. Pennoyer said after that projection, a bad revenue forecast added approximately $50 million more to the gap, leading to the $1 billion figure cited by the NRSC.

It should be noted that Maine law prohibits the state from operating at a deficit, so the Legislature and Baldacci, King’s successor, had to close the $1 billion gap.

Verdict: The numbers are good, but context for the financial situation is missing. You can decide for yourself whether you think King’s management of the situation helped cause the budget shortfall.

We rate this statement true.

Michael Shepherd — 621-5632

mshepherd@mainetoday.com

Twitter: mikeshepherdme