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Sen. William Diamond, D-Windham, Appropriations Committee co-chair

Lawmakers will begin meeting next month to figure out exactly where they can cut $30 million more out of a state budget that has already been pared to the bone.

"Our challenge is going to be significant. It's not a small task," said Rep. H. Sawin Millett Jr. of Waterford, the ranking Republican on the Appropriations Committee. "It will have long-term consequences for Maine – and should."

The $5.8 billion two-year budget passed in the last session was $500 million smaller than the previous budget – the first time in 30 years that the state budget decreased. Legislators were forced to slash spending to contend with a $1.4 billion drop in revenue in the current fiscal year and in the next biennium.

The cuts included a $30 million "place holder" for fiscal year 2011, which starts July 1, 2010. That means the budget assumes $30 million in unidentified cuts for that fiscal year.

Now the Appropriations Committee needs to find where those savings will come from.

"It's not going to be pretty," said Sen. William Diamond, D-Windham, co-chair of the committee. "We're talking about some structural changes, frankly, which will be long-lasting."

Committee members are to meet over the summer and fall to identify inefficiencies in government, as well as potential structural changes that result in ongoing savings – "basically looking to create a leaner, more affordable state government over time," said Millett.

The plan is to present the full Legislature a proposal in the next session, which begins early in 2010. There would be opportunity for public comment at that time.

The committee will meet July 22 and 23 and Aug. 12 and 13, according to Diamond, with future meetings likely.

Complicating the task ahead, said Millett and Diamond, is that Maine's revenue forecasts continue to decline, making the future budget situation worsen.

"The worst thing is it's going to be a moving target," said Diamond. "It's like a bad dream."

Everything is on the table, lawmakers from both parties agree. The major cost centers will have to be considered, said Diamond, adding that 80 percent of the state budget is composed of education and health and human services spending.

Millett suggested that budget-cutting efforts so far have entailed across-the-board cuts, spreading the pain across state government.

That won't work going forward, he said. The committee will have to look at what programs and services the state will no longer fund and eliminate them.

In the 1990s, legislators facing a budget crisis cut a variety of programs, boards and commissions, said Millett.

One-time changes won't solve the problem, said Millett. The cuts need to provide ongoing savings. The result, said Diamond, will be a cultural change for state government.

The changes will be as significant as some already made, such as having state employees pay toward individual health insurance and imposing government shutdown days.

The privatization of some state services will have to be considered, as well, said Diamond. He declined to discuss specifics ahead of the meetings.

And there's no chance of adding to the revenue stream, he said.

"I don't see any appetite for tax increases," said Diamond.

Sen. Richard Rosen, R-Bucksport, said meeting over the summer and fall affords lawmakers time to consider the budget without the time pressure of getting the bill passed before the session ends.

"We accomplished a lot in the session. One of the things that (the) biennial budget we developed lacked was vision," said Rosen.

"The real opportunity of this new exercise is to kind of embrace a vision of how do we realistically deal with a fairly extended time of diminished revenue coming into the state?"

Lawmakers now have time to be more methodical, said Rep. David Webster, D-Freeport, a member of the committee.

"We've raked...