AUGUSTA -- Gov. John Baldacci told local business leaders Wednesday that his proposed two-year budget -- and the cuts necessary to balance it -- spreads the pain to many sectors.

"We're all in this together," he told about 70 people attending a Kennebec Valley Chamber of Commerce Business breakfast. "There isn't anybody who isn't seeing some pinch."

He also repeated his belief that Maine still has too much government at all levels for a state with a small population.

Last week, Baldacci unveiled a proposed $6.1 billion two-year budget that eliminates 219 state positions, requiring 139 layoffs. The plan also requires state employees making more than $50,000 a year to contribute to the cost of their health insurance, and proposes a new retirement incentive program.

Also, it institutes 10 percent reductions in some tax rebate programs; increases fees assessed by the departments of Marine Resources, Inland Fisheries and Wildlife and Conservation; and proposes to send 118 prisoners to out-of-state facilities.

In the area of human services, it counts on nearly $100 million from the federal government, an amount that would have to be covered by the state if the money does not come from Washington.

The Democratic governor, in his seventh year as chief executive, said his efforts to reduce government administration began early in his tenure when he merged the Department of Human Services and the Department of Behavioral and Developmental Services.

He said that move saved $8.5 million in administration.

"It saved money," he said. "It made it more efficient and it gave families a better outcome."

Since then, he's continued pushing for similar reductions in education by requiring school district consolidation, better coordination between state and county correctional systems and changes in the state's natural resource agencies.

Despite news that a proposed wind-energy project in Aroostook County has been put on hold, Baldacci said he is bullish on energy. He said the state's wind and other natural resources put Maine in a good position to take advantage of efforts to reduce reliance on foreign oil.

And, if stimulus money comes to Maine for education and other purposes, Baldacci believes Maine will be better positioned because of the cuts made to state government.

"We're going to be stronger and see results sooner," he said.

Susan Cover -- 620-7015

scover@centralmaine.com