First of three parts

By JOSIE HUANG

MaineToday Media, Inc.

Amelia Houser has some major question marks in her life. Will she find affordable day care so she can get back to work? Will she fulfill her plan to become a phlebotomist, so she won't worry about becoming homeless again?

At the very least, Houser said, she can count on $413 a month from a welfare program that supports families until parents find stable jobs and nearly $400 in rental assistance and $40 in diaper vouchers from the general assistance office in Portland.

But that could change as the state looks for ways to cover a massive shortfall in its current two-year budget.

A weak economy, federal rule changes in the Medicaid insurance program and, some would argue, poor budget decision-making have led to less revenue than projected, creating a shortfall of as much as $200 million in the $6.3 billion state budget.

The exact magnitude will be clearer this week, when a revenue forecasting task force meets in Augusta to update its projections. In the interim, department heads have identified tens of millions of dollars in cuts needed to close the gap between spending and revenue without raising taxes.

Proposed changes to social service programs, which account for a third of state spending, have resulted in the greatest outcry. The Department of Health & Human Services has already cut or proposed cuts of almost $100 million in programs that serve tens of thousands of elderly residents, people with mental illness, people with mental retardation, foster children and low-income adults.

One of the most controversial proposals would save the state $1.2 million by keeping an estimated 13,000 households like Houser and her 2-year-old daughter, who receive Temporary Assistance for Needy Families, from getting general assistance, starting this summer.

Houser said she doesn't know what she will do if her general assistance is reduced. She said nearly all of it goes toward paying the balance of her rent not covered by Temporary Assistance.

"General assistance is just to get on my feet," said Houser. "In a year from now, I see myself getting no help whatsoever. I'm working my way up."

MAJOR CUTS PROPOSED

Among the major cuts over the two years:

n Reducing funds for home-based services for elderly who need help with tasks such as housekeeping and meal preparation: more than $1.4 million.

n Reducing the Medicaid reimbursement rate for hospital-affiliated physicians and bringing it in line with a new, slightly increased fee schedule for private physicians: $7 million.

n Freezing enrollment in Maine's Medicaid program for low-income, childless adults without disabilities, "non-categoricals" who wouldn't otherwise be eligible for the government health insurance program: more than $5 million.

n Reducing reimbursement rates for foster parents and adoptive parents: $3 million.

"At the hearing, the elderly were testifying before us and domestic violence people were after us," said Ellen Dorr, director of the Woodfords Therapeutic Foster Care in Westbrook. "I said to myself, 'What's wrong with this picture?' "

Gov. John Baldacci said in an interview Friday that these cuts are the gravest he has faced since inheriting a $1 billion deficit when he entered office in 2003.

Responding to criticisms that the proposed cuts hurt the most vulnerable Mainers, Baldacci said that he is relying on his commissioners and staff, and his own instincts, to help him make the best decisions.

"These decisions are hard for me to make, but we've got to be mindful that people are tightening their belts and the economy is slowing down," Baldacci said.

AGONIZING DECISIONS

Longtime advocates and legislators alike call this round of cuts among the most agonizing since the early 1990s, when a stalemate over the budget led to the shutdown of state government. Sen. Joe Brannigan, the Portland Democrat who co-chairs the Legislature's Health and Human Services Committee, said social services have had to endure years of cuts, and the latest round will cripple or spell the end of many.

A committee report estimates services will be cut for more than 2,000 seniors, more than 1,800 mentally retarded adults and more than 1,400 mentally ill adults, among others.

State officials have proposed, for example, to stop covering the cost of case management for mentally ill patients whose incomes are low, but not low enough to qualify for Medicaid.

A reduction in state funding earlier this year forced Catholic Charities to drop 40 people from their case management program, and the latest proposal to eliminate the program at a savings of nearly $500,000 would end services for the remaining 55 clients, whose diagnoses range from severe depression to schizoprenia.

"Communities are going to see the cost," said Don Harden, the agency's director of adult services. "A lot of the clients we serve, it would not be a stretch to say that they may end up in jails, shelters and going to other parts of the health care system, so it's not like the costs are going to go way down."

Brannigan said that legislators should draw on state reserves, or raise taxes and fees, to make sure the state's most vulnerable residents are looked after.

"New revenue is not off the table for a lot of us," Brannigan said. "We cannot treat people in this state this way."

But Baldacci reiterated his opposition to raising taxes Friday, saying he wants to protect the economy and small businesses. Republicans, many of whom note that Maine has one of the highest tax burdens in the country, say they will fight any tax hike. Senate Minority Leader Carol Weston, R-Montville, said raising taxes would exacerbate the revenue shortfall by choking the economy.

Weston said short-sighted policy decisions have helped put the state in its current budget crisis. The 10-year lease of the state's wholesale liquor business several years ago, for example, may have netted the state short-term gain, but it resulted in the loss of annual revenue, she said.

Weston said approving cuts in social services is not easy, but the job can be done by slashing areas where Maine has been more generous than other states, such as offering Medicaid to "non-categoricals."

"If you're looking at your most vulnerable, you have to look at the needy elderly and children, and the disabled," she said.

But advocates say that cutting back Medicaid enrollment will hurt the state's goal of achieving universal health care. The state will also lose about two federal dollars it draws down for every state dollar spent on Medicaid.

"It makes me sick," said Chris Hastedt, public policy director for the advocacy group Maine Equal Justice Project, estimating that more than 5,000 people will not get Medicaid because of the cap. "These are all people living under the poverty level, and many of them have health conditions."

In January, the governor's office announced a $95 million gap, and the Department of Health and Human Services was targeted for about $40 million in savings in programs.

Bureau officials discovered that to fund some other DHHS initiatives -- like transferring the operation of their troubled Medicaid billing system to a contractor -- they would have to make an additional $25.5 million in cuts within the department. Updated revenue projections to be released Monday will confirm whether the budget shortfall will grow by an additional $99 million, as state officials have been told to anticipate. If that is the case, DHHS officials will need to find another $34 million in savings.

On Thursday, DHHS commissioner Brenda Harvey told the Appropriations Committee that the department is looking into cutting podiatry services for diabetics on Medicaid, eliminating the food stamp program for legally admitted aliens and reducing reimbursement rates for hospice care.

To address the projected $99 million shortfall, the governor's office spread the anticipated cuts by requesting an across-the-board 3.5 percent cut in all General Fund programs, said Rebecca Wyke, Baldacci's finance commissioner.

Baldacci will take the resulting proposals and the updated revenue shortfall projections expected this week and draft what is called a "change package," an amendment to his $95 million supplemental budget.

It is unclear what cuts will be included in the governor's amendment, which he plans to present to the Legislature the first week of March.

"We will have to react to revenue projections," Wyke said.

The state has tried to lessen the impact of some of its cuts. With the proposal to cut general assistance to families receiving Temporary Assistance for Needy Families, the state is proposing a change to the TANF provision that would give eligible families extra money for rent.

But Houser said the $50 extra she would get will not be enough to make her $795-a-month rent payment in Portland. Communities, such as Portland, could continue to give assistance to TANF families, but it would be on their dime.

"This is going to put families out on the street, I guarantee you," Houser said.