My wife, Birdie, gets appropriately irritated with me when I suggest New Year’s resolutions she might want to consider for herself. “Stick to your own,” she tells me. So it is with some trepidation that I suggest one resolution for a whole bunch of people … the 186 incoming members of the 126th Legislature. Here it is: “Let’s work together. Republicans, Democrats, Independents, Red Sox fans, Yankees fans — all of us.”

On swearing-in day, new Senate President Justin Alfond set the right tone when he suggested we disappoint those who are spoiling for a fight in Augusta. While there are significant philosophical differences between Republicans and Democrats, time is too short, the problems too big, and the stakes too high for petty, partisan bickering.

As we begin our work, the most significant challenges we face are addressing three budget shortfalls. The first, about $35 million, is a revenue shortfall for the fiscal year that ends on June 30, 2013. This is largely the result of an anemic national economy and the continuing fiscal cliff stalemate in Washington that is doing a number on consumer confidence, translating into low sales tax revenue for Maine and other states. Gov. Paul LePage has issued a spending curtailment order, a prudent and necessary measure to balance our state budget as the Constitution requires. These cuts will not be easy or pleasant, but this step is not without recent precedent. Governor John Baldacci ordered more than $180 million in curtailments between 2008 and 2010.

The second shortfall, which is estimated to be more than $100 million, is in the Department of Health and Human Service. Budget overspending within the state’s Medicaid budget have been a perennial problem, largely because of a system that has been operating beyond its means for years.

As recently as 2010, Maine spending on Medicaid was 35 percent higher than the national average. It grew 78 percent between 2002 and 2011. To make matters worse, the federal matching fund rate for MaineCare dropped from 74.73 percent in 2010 to 62.5 percent in 2012.

We made significant progress in the 125th Legislature by taking tough but necessary steps to reduce Medicaid spending, but this new shortfall shows how deeply rooted and complex the problem is.

The 126th Legislature needs to focus not only on how to balance the books, but on how to reduce spending by moving healthy Mainers off of the cycle of dependency and give them the tools to become self-sufficient.

Our third budget challenge is a potentially much larger shortfall we will face in the two year budget that will go into effect July 1. That task will be the most daunting of all.

We should do our best to cut spending where we can intelligently do so, but in the long run the financial health of both our families and state government will only come when our economic and business climate improves in Maine. And, at least according to Forbes Magazine, Maine has a long way to go. Once again, the business magazine rated Maine dead last in its list of best states in which to do business. That’s been the case for three years running now. The magazine cites factors like Maine’s high corporate income taxes and energy costs for the dismal ranking. Forbes says bluntly, “Maine’s problems run deep.”

But the Forbes’ ranking doesn’t tell the whole story. Maine state government took extraordinary first steps in the 125th Legislature that were designed to improve the state’s business climate. We lowered income tax rates for all Mainers and passed regulatory reform, removing much of the bureaucratic red tape that Maine businesses identified as their biggest obstacle. Those changes did not go unnoticed. Maine’s business ranking climbed significantly in Chief Executive Magazine and CNBC’s rankings. And the Tax Foundation said “Maine had the most sizable rank improvement this year, as a repeal of their alternative minimum tax and a change in treatment of net operating losses vaulted them from 37th to 30th best overall.”

What should we take from these mixed messages about our business climate? A reasonable conclusion is that we are heading in the right direction, but still have a long way to go.

As we begin a new legislative session, Maine citizens are expecting real solutions to these major challenges. We will only find them by checking our political affiliations at the door and listening to and working with everyone, even Yankee fans.

Sen. Roger Katz, R-Augusta, is the assistant Senate Republican leader.

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