Maine revenues continue to slip; shortfall as high as $400M

Posted Nov. 12, 2009, at 9:17 p.m.

AUGUSTA, Maine — Gov. John Baldacci has ordered the preparation on an executive order to curtail state spending as state revenues continue to fall below estimates with Finance Commissioner Ryan Low expecting the revenue shortfall now will range between $300 million and $400 million for the two-year budget.

“October revenues were nearly as bad as September,” Low said in an interview. “They are down by $26.8 million.”

He said when preliminary figures were known late last week, the governor ordered the preparation of a curtailment order to stop state spending under his emergency budget authority. He said the curtailment process cannot make up for the entire revenue shortfall, but it is important to stop spending as soon as possible.

“That should go out within a couple of weeks,” Low said. “It does take time to put it together while checking to make sure it does not exceed his authority.”

Last month the governor ordered agencies to identify how they would cut spending to meet a target of $200 million. Low said instead of another round of requests, his office will use those as a starting point and in one-on-one meetings with state agencies, push for further spending cuts.

“We are building our budget on the assumption that we are going to see a revenue reduction of $300 [million] and $400 million,” he said. “If it’s less than that, I will be really happy. But, we have to plan for the worst.”

Low said the curtailment order would cut general-purpose aid to education at greater levels than have been publicized. He said the figures distributed to schools recently were based on the $200 million target.

“It is important for the schools to know as soon as we can tell them what the size of the curtailment will be,” he said. “But we don’t know that yet.”

Sen. Richard Rosen, R-Bucksport, the GOP senator on the Legislature’s Appropriations Committee, said the bad revenue news in October was not unexpected. He said members of the panel from both parties have been expecting that revenues would not meet estimates; the question has been how big a problem they would face.

“We now have a better understanding, although we won’t know the actual projection until after the revenue forecasting committee meets later this month,” he said.

Rosen said the already difficult job of the committee is made more difficult as the red ink mounts. He said the panel needs to look at restructuring state government and eliminating some current programs because no one expects the economy to recover quickly.

“It doesn’t help the future of the state. It does not help the young people we want to attract to Maine if we don’t face the music now and face the problem before us,” he said.

Rep. Emily Cain, D-Orono, co-chair of the committee, said the revenue shortfall is troubling. She said that more than ever the often-repeated phrase of “everything is on the table” has to be followed during budget talks.

“We really have to talk about all the options and what they mean to the state,” she said.

Cain said the committee already has planned to meet six days in December to work on budget issues. She said there would be more if they can be productive.

Low said there was very little good news in the monthly revenue report. Like September, all of the major revenue sources failed to meet their targets.

The single largest source of state revenue, the individual income tax, continues to be significantly below projections. It was $19 million under estimates in October, or 15.2 percent off projections.

The second-largest source, the sales tax, was also below estimates. Of the 10 revenue categories in the memo, only estate and tobacco taxes were significantly above estimates. A large estate settlement spiked revenues $3.5 million above estimates and tobacco taxes were $754,000 over projections.

After the first four months of the budget year, revenues are $69 million below estimates.

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