By Dave Sherwood

PORTLAND Maine (Reuters) - Maine's largest city has begun clamping down on spending as newly re-elected Republican Governor Paul LePage makes good on a campaign promise to cut funding to cities and towns that give aid to undocumented immigrants.

In an internal memo released on Wednesday, Portland city officials said they had frozen hiring and cut travel and overtime spending after their requests for reimbursement from the state for assistance provided to families with children in emergencies had gone unanswered since July.

The budget shortfall could grow to as much as $3 million this year, city officials said, a hefty sum that underscores the increasingly local impact of the tense congressional standoff over national immigration reform.

"We just don't have that kind of money sitting around, so we need to act prudently," said city spokeswoman Jessica Grondin. "We're in a holding pattern until we receive some kind of official response."

Tea Party-backed LePage, who was re-elected last week with a strong mandate to reform the state's welfare system, had threatened in June to cut funding to municipalities that give state-reimbursed general assistance to undocumented immigrants.

"Tell your city councilors and selectmen to stop handing out your money to illegals," LePage said in a radio address.

Portland does not distinguish between documented and undocumented residents, and has argued state law forbids them from denying aid to residents in need, a position backed by Maine Attorney General Janet Mills, a Democrat.

"The person fleeing domestic violence, the victim of human trafficking, the asylum seeker awaiting federal approval ... are least likely to have this paperwork on hand during a crisis," Mills said.

LePage contends he is enforcing an 18-year-old federal law that supersedes state law.

The feud will likely be resolved by courts.

In July, the Maine Municipal Association, Portland and neighboring Westbrook jointly sued the state, arguing the administration had failed to hold public hearings before issuing the new policy.

"It basically came down as an edict from the governor," said municipal association spokesman Eric Conrad. "How can you expect a municipal clerk to determine immigration status when they've never done that before, and haven't been trained?"

The Department of Health and Human Services will continue to reimburse cities "in a consistent manner and in accordance with federal law," a spokesman said in a statement on Wednesday.