June 19, 2018
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Revenues keep falling shy of state estimates

By Mal Leary, Maine Public

AUGUSTA, Maine — State revenues continue to fail to meet estimates and members of the Legislature’s Appropriations Committee are wrestling with the question of how much of a shortfall they are facing as they work on recommended changes to the state budget.

In August, after one-time accounting adjustments, revenues were under budget by $3.4 million. For the first two months of the budget year, which began July 1, revenues are $14.2 million below estimates. But that is only part of the budget problem.

“We have about $25 million that we pulled to balance the previous budget,” said Grant Pennoyer, staff director for the panel. “We won’t know officially about the revenues until the reforecast in November.”

That is a $39 million problem in addition to the $30 million in cuts the panel is directed to make in the second year of the two-year budget. Rep. John Martin, D-Eagle Lake, said he has no doubt revenues will continue to be a problem.

“It’s going to get worse before it gets better,” he said. But Pennoyer would not speculate on how big the revenue shortfall will be, saying that will be determined by a process based on an independent economic projection. That will happen later this fall and will be the “budget hole” that lawmakers will need to fill when they re-turn in January.

“When people ask me how big it will be, I just say, ‘Big,’” said Rep. Emily Cain, D-Orono, House chairman of the committee. She said no clear pattern has emerged, with some state revenues improving while others still are failing to meet estimates.

“I think we need to move forward on the process we have set up because we know we will need to find more savings,” she said. “What we don’t know is how much.”

Mike Allen, director of economic analysis at Maine Revenue Services, said state revenues are mixed. The largest source of state revenues, the individual income tax, was below estimates in August, bringing the year-to-date shortfall to $11.3 million. Sales tax revenues after two months are down by $12 million, with a one-time accounting adjustment. Without that adjustment, Finance Commissioner Ryan Low said, the sale tax numbers would have been down about $6 million more.

There are some areas where revenues are above estimates. Corporate income tax receipts are $4.5 million above estimates, most of that from audits by Maine Revenue Services. Lottery revenues are about $350,000 above after two months, and several small tax and fee sources that are lumped together are $1.1 million above pro-jections so far this year.

“We did see some good news in auto sales,” Allen said. “If you focus in on just automobile dealerships for the month of July, they were actually up 3.3 percent.”

Allen said August sales tax numbers reflect July sales. He said during the calendar year so far, auto sales have been down compared with the same period a year ago.

“It appears the cash for clunkers program did have some impact and we will see more of that in September revenues,” Allen said. But Sen. Richard Rosen, R-Bucksport, is concerned that the federal subsidy to buy a new car may cause an increase in revenues now that will be lost in future months.

“Our revenues there could be worse than they appear,” he said.

Uncertain revenues are not the only worry of the panel. Many are worried about programs that go over budget and will need to be funded.

“We can’t wait until the November reprojection to acknowledge that to date we have a revenue problem. We can’t wish it away,” said Rep. Sawin Millett, R-Waterford, the ranking GOP member of the committee. “Nor can we ignore the fact that between now and the time a supplemental budget is prepared [there may be] over-expenditure problems we may see.”

The committee spent Wednesday afternoon in partisan caucuses reviewing programs that may be considered for cuts or elimination by the full committee. The panel meets today to review concerns raised earlier this month about programs in the Department of Health and Human Services that are seeing greater use than originally expected, and that also could affect budget negotiations.

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