AUGUSTA, Maine — Maine’s economy is in a little better shape than the Consensus Economic Forecasting Commission thought last fall, and that likely will lead to a small increase in projected state revenues over the remainder of the two-year state budget, members said Monday.
“The changes that we did make were in a positive direction,” said University of Southern Maine economics professor Charles Colgan, chair of the commission. “We don’t think that the economy fell as much in 2009 as we previously thought, and we think the economy may grow a tad faster in 2010 than we previously thought.”
He does not expect the re-projection of the group’s economic forecast will “significantly” affect state revenues, although he acknowledged even a minor change can make a difference.
“Even a small change can translate into millions of dollars but then, you are dealing with a multibillion-dollar budget,” Colgan said. “The issue of how the economy is doing is that it’s on the road to recovery, but it’s not there yet.”
The panel spent most of the day reviewing the data from various state and federal sources, as well as national economic forecasts. A key factor in its decision was a change in the data supplied by the federal Bureau of Economic Analysis based on actual 2009 numbers instead of the earlier estimates by BEA.
“It turns out 2009 was just terrible, not disastrous,” Colgan said.
Members of the Legislature’s budget writing Appropriations Committee do not expect the change in the forecast will have a major impact on their efforts to balance the budget and Gov. John Baldacci’s plan to solve the $438 million budget shortfall.
“I would rather have a little good news than more bad news,” said Sen. Bill Diamond, D-Windham, co-chair of the Appropriations Committee. “We will have to see just what this means as it goes to the revenue forecasters.”
He said he continues to be worried about what might happen in the national economy that could affect the state, and that one of the assumptions in the forecast is that Congress will continue to provide significant funding for stimulus activities like unemployment and aid to the states.
“Yes we are depending on Congress, but we are always depending on Congress to act in every budget,” Diamond said.
“I am even more skeptical now that Congress will pass another big spending package to help the economy after some of the actions, politically, that happened last week,” Sen. Richard Rosen, R-Bucksport. “I am not sure the public will support Congress passing another big package to stimulate the economy.”
He said the fall projections by the economic and revenue groups are based on the assumption of a large amount of federal spending, and the economic group is repeating that assumption in this forecast.
“If Congress does not act, we are really facing a serious problem,” Rosen said.
Rep. Emily Cain, D-Orono, co-chair of the appropriations panel, agrees and said she is uncomfortable with making assumptions that Congress will act, but she said Maine is not alone in expecting some ongoing aid to come from the federal government during this recession.
“I take some comfort that we are not expecting billions of dollars to come raining down on the state,” she said. “We have taken a very conservative approach to this in the budget.”
Cain said while a few million dollars is certainly good news, it will do little to alleviate the tough budget decisions that lawmakers will have to make this session.
“It will mean fewer cuts in some areas,” she said. “Those areas will have to be determined through the committee process. I don’t know what they would be right now. But it is good news; it means the hole could be just a little bit smaller.”
The revenue forecasting group meets in late February and lawmakers will have their revised revenue estimate for consideration in March before they complete work on the state budget.