AUGUSTA, Maine — Lawmakers this week will be asked to pass an emergency bill to assure the state ends the budget year in the black after May revenues fell $21.2 million short of estimates.
The shortfall comes just weeks after revenue forecasters set the new estimates of state income.
Finance Commissioner Ryan Low said the budget just signed into law a week ago had a balance of $26 million.
But because the May shortfall eats up most of that cushion, and worried that June revenues also might fall short of estimates, the governor will propose transferring $25 million in state reserves that had been allocated to budget year 2010 back to the current budget year.
“Just in case we need it,” Low said.
He said the proposed bill also would seek to take about $5 million that is expected to be left over in various spending accounts at the end of the budget year and apply that to the budget shortfall. Usually those balances are allowed to lapse into the next fiscal year.
“We also believe that about half the shortfall in May was a timing issue,” Low said.
He said one payment of about $6 million was due in May, but came in on June 1.
Low acknowledged he is worried whether June revenues will meet estimates given that many other states also saw May revenues below estimates. He said he does believe the $56 million in identified resources in the governor’s proposed bill would be enough to cover the three weeks remaining in this budget year.
“New Hampshire was down $26 million in May,” Low said. “I read news reports of several other states that saw revenues drop after they had done re-projections.”
The unexpected drop in May revenues worried members of the Appropriations Committee. Sen. Bill Diamond, D-Windham, co-chair of the committee, said revenues had just been re-projected and took little comfort that other states also have seen unexpected decreases.
“We will find a way to plug this hole through June,” he said. “But this is very worrisome. We have to start looking at what this may mean for the rest of the budget.”
Rep. Emily Cain, D-Orono, the House co-chair of the panel, said she expected that revenues would not meet expectations over the course of the next two years, but did not expect a significant shortfall in the first month of the new estimates.
“I wish there were a magic indicator to tell us what revenues will be in two months or three months, but there is no magic indicator,” she said.
Cain said the state would be able to meet obligations through the month because reserves had been built up in recent years. She said the proposal outlined by Low should provide enough cash for this budget year. But the worry is if the revenues continue to fail to meet expectations in the months ahead.
“You can be sure we will be asking some hard questions when that [legislation] is formally presented to us,” she said.
Low is scheduled to appear before the panel at 1 p.m. today.
Rep. Sawin Millett, R-Waterford, is the lead GOP member on the Appropriations Committee. He also served as finance commissioner in the early 1990s when state revenues plummeted during a recession.
“Sales and individual income taxes are apparently trending downward,” he said. “And apparently the estimate in April was an underprojection of that erosion.”
Millett said he is very worried the trend will continue through June and into the summer months.
According to a memo released by Low, individual income tax revenues were down $18.3 million in May. Most of that was from the withholding in paychecks, which were $12.1 million below estimates. The sales tax was also below estimates by $3.4 million.
“The only conclusion I can draw is that some of the temporary layoffs that were occurring at the paper mills are being stretched out longer and that is affecting sales as well,” Millett said.
While most of the revenue news was bad, a few sources of state funds were up for the month. Corporate income taxes were above estimates by $3.4 million. Lottery revenues were up in May by $370,000 due to the large Power Ball lottery jackpot, but are still behind the year-to-date expectations by $1.9 million.