While keeping the budget level is a substantial accomplishment, much more could be done.

The new Legislature is now in session. There has been much press comment on the challenges this Legislature will have to face, particularly the challenge of passing a state budget that must address our expected $880 million shortfall for the biennium beginning July 1, 2009.

Gov. Baldacci has come forward with his proposal to address this shortfall. To his credit, the governor's budget proposal appears to address the shortfall without increasing taxes. He does call for various fee increases, but most of the shortfall is addressed with cost savings.

Here is where the governor lost me. He does not provide a detailed accounting of specific cost-savings proposals. Rather, he identifies areas such as the Department of Corrections, where he proposes savings by closing units at three prisons and sending 118 prisoners to facilities out of state.

Outsourcing of services is commonplace in the private sector and was much favored by Bush's Department of Defense. This novel approach at the state level is apparently the result of a study by the management consultancy McKinsey & Company.

The governor's proposal also includes modest layoffs for state government employees – 139 out of a state work force of 13,700 (or 1 percent), flat-funding of K-12 education, a nominal $108 million reduction in the Department of Health and Human Services budget of $3.28 billion (3 percent).

It is nominal because the governor would use $90 million of the likely federal stimulus package to offset all but $18 million of this cost reduction.

The governor also, more significantly, calls for a 2.4 percent or $12 million reduction in funding for higher education.

The governor's proposal runs to 500 pages, so I am sure I have missed some things. Nonetheless, by my math the proposed cuts don't seem to come close to the $880 million so-called deficit.

In terms of big-ticket items, the governor lists the $108 million cut at DHHS, perhaps $8 million to $10 million in personnel cuts, the corrections savings of perhaps $30 million, and a reduction of $12 million for higher ed.

So far, the governor's major cuts total $150 million to $160 million (once one nets out the $90 million in anticipated federal funding that the governor proposes to add back, these cuts become only $60 million to $70 million). How could this be?

First, remember that the nominal $880 million shortfall is actually calculated by taking the total revenues that would be expended if all programs grew as forecast by each of the state's departments.

These departmental forecasts anticipate, in most cases, expected growth in programs and normal wage increases.

From these total forecast program and department costs are deducted the expected state revenues. The result is the shortfall, in this case $880 million.

In fact, the governor is proposing a budget of $6.1 billion for the next biennium. The budget for the biennium that ends in July of this year is $6.3 billion, but with proposed reductions being considered now to address a revenue shortfall in this fiscal year (ending June 30), the real budget this year will end up at about $6.1 billion.

So, in spite of all the rhetoric, there are really no overall cost cuts at all, simply measures to contain program cost escalation, namely in Medicaid (MaineCare) and K-12 education.

Not that cost containment is easy to do. Let it be said that the fact that the governor has, for the first time in his seven years, proposed a budget that is not higher than its predecessor is a significant achievement – and one not replicated since 1974. But let's not get too carried away with the "shout outs" for this proposal.

Once again the governor has failed to address the systemic and chronic budget-busting areas of health and human services, principally the Medicaid program and K-12 education.

For Medicaid, the governor has simply applied a few Band-Aids that will soon wear off.

For K-12 education, the governor has turned the problem over to local school districts. If they want any increase, they will need to fund it through the property tax.

This is unfortunate because the current macro-crisis is just the time when there may be political will to take on these kinds of issues.

Apparently such political will, so ably displayed by our new president, has not rubbed off on the governor and legislative leadership.