State income below forecast

Posted Oct. 13, 2009, at 10:11 p.m.

AUGUSTA, Maine — State revenues were sharply below estimates in September, down by $28 million, triggering Gov. John Baldacci to order state agencies to find ways to cut $100 million a year from the two-year state budget passed a few months ago.

“We sent out the supplemental budget instructions today, and we want the plans from the departments by the end of the month,” Baldacci said Tuesday. “Our goal is to have a supplemental budget to the Legislature Dec. 15.”

Finance Commissioner Ryan Low said the instructions set targets for agencies that total $200 million. He acknowledged that number may not be enough if revenues do not start to meet estimates soon. After three months, revenues are $42.3 million below projections.

“We won’t know how bad it is until revenues are reprojected next month,” he said. “We are very carefully watching the October revenue numbers to see if there is a trend.”

Low said the forecasting process requires the economic forecast group to meet and send its recommendations to the revenue forecasting commission in November. Once revenues are reforecast, the supplemental budget is adjusted to meet the new revenue numbers.

“It is important we start the process now,” Low said.

He said work also would begin soon on planning for a curtailment order under the governor’s emergency budget powers.

Baldacci said no final decision has been made on a curtailment order, but that is because he is not sure how large it will need to be until Low has a chance to analyze this month’s revenues. He acknowledged it’s likely he will order cuts this fall.

“We can’t wait,” he said. “We have to get moving on this.”

Rep. Emily Cain, D-Orono, co-chair of the Appropriations Committee, said the committee already has been working on an accelerated schedule to find the $30 million in spending cuts for the second year of the budget. She said that work would help in dealing with additional cuts that apparently will be needed.

“We have been bracing ourselves for what may come,” she said. “I have learned this year to expect the unexpected.”

Cain said the governor’s curtailment process is a “blunt instrument” that will reduce spending, but not with the ability the Legislature has to tailor spending. For example, he cannot eliminate all the funding for a program where the Legislature can.

Sen. Richard Rosen, R-Bucksport, the lone GOP senator on the Appropriations Committee, said state revenues continue to disappoint and lawmakers who already have a tough job now face additional hard decisions on state spending to stay within revenues.

“The question early on was whether we would need a special session this fall,” he said. “I would think that is certainly a question now that has to be discussed. The sooner we stop spending what we don’t have, the better.”

Baldacci said he has had several discussions with Low and other members of his staff about a special session, but said the timing is not right. He said given the revenue forecasting process, the soonest a bill can be completed is mid-December and lawmakers are scheduled back Jan. 6, 2010.

Cain agreed. She said the budget-writing process is not just the Appropriations Committee and it will take time for the entire Legislature to understand what the governor proposes and hold public hearings on those proposals.

“This is going to be difficult for all of us,” she said.

Low said most of the state’s red ink is from income taxes failing to meet last April’s downward reprojections. The individual income tax was nearly 17.7 percent below projections in September and year to date are down 12.3 percent, or $39.3 million. Corporate income taxes were down $1.9 million in September.

When asked whether there was any good news in the monthly revenue report, Low said, “No.”

He said a few revenue lines were slightly up, but those gains were more than wiped out by the income tax revenues so far below estimates. The income taxes are the source for more than half of state revenues that are projected to total just over $2.8 billion this budget year.

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