Gov. Butch Otter has ordered a 1 percent holdback in the state budget, cutting $27.3 million mid-year. "Acting in moderation now is the prudent and fiscally responsible thing to do," the governor said at a news conference. He ordered state agencies to hold an additional 1.5 percent of their budgets “in reserve” in case further budget cuts are needed, but didn’t cut that additional amount at this point.

Otter had ordered state agencies to prepare plans for budget cuts of 1 percent, 2 percent, and 2.5 percent. Asked why he chose the lower figure, Otter said, “That’s now what it appears, because we got to it early enough.” But he noted the additional 1.5 percent being held in reserve, “until we give you an all-clear signal.” That might not come until spring, or could be as soon as November, Otter said.

Hardest hit by the holdback will be the state Department of Health & Welfare, which will have to trim $5.4 million from its budget right away, and state colleges and universities, which must cut out $2.8 million. Otter said the 1 percent cut shouldn’t impact services to the public. Some agencies will hold off on part of their employees’ salary increases or bonuses because of the cuts, he said. “I would tell you that no essential services are going to be hurt.”

The mid-year budget cut, Otter’s first, came because state revenues plummeted compared to projections, even though lawmakers set a conservative budget this year that fell more than $40 million below projected tax revenues. Mike Ferguson, Otter’s chief economist, said, “Basically what we’re seeing is a tremendous amount of turmoil in the financial markets. … We will continue to monitor the situation.”

---

---