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Revenue forecast edges up for state

Posted Feb. 23, 2010, at 9:04 p.m.

AUGUSTA, Maine — The state revenue forecasting committee has revised state revenues up by $51 million over two years, reducing the $438 million hole in the state budget.

But having more resources might cause more problems than are solved as lawmakers scramble to restore funding for various programs slated for reductions in the governor’s budget.

“There will be a mad rush to put forward all sorts of ideas to use these new resources that go well beyond the resources that are available,” said Sen. Richard Rosen, R-Bucksport, the GOP senator on the Appropriations Committee.

He said the state is still facing a huge budget hole of about $360 million, and there will still have to be significant cuts in state programs to bring the budget into balance.

Sen. Bill Diamond, D-Windham, a committee co-chair of the panel, agreed with Rosen that the additional resources would result in lawmakers seeking part of the funds for their issues of highest concern.

“They all want to spend that same dollar,” he said. “That does not change our responsibility, on this committee, to weigh all the competing demands and make the best overall choices.”

Finance Commissioner Ryan Low said Gov. John Baldacci will weigh in with his recommendations next week. He said that in addition to the revenue reprojection, there are additional federal funds announced last week by the federal Department of Health and Human Services.

“The governor wants to mitigate the impacts that we have heard about in the public hearings and that have come up through the committee process,” Low said. “Certainly focusing in on health and human services — those places where we provide 24-7 care — nursing homes, assisted living, those kinds of places are where we will focus.”

Low cautioned that the governor’s proposal still will contain cuts in services that no one wants to make.

“This change package will be like any budget we get,” said Rep. Emily Cain, D-Orono. “The governor proposes and the Legislature disposes.”

She said she expects there will be disagreements among the partisan caucuses of the Legislature on how to rewrite the budget given the additional resources.

Members of the committee also peppered the revenue forecasting group with questions about why in less than two months there is a significant change in revenue projections.

Jerome Gerard, chair of the group, said the revenue increases are the result of the economic forecasting commission revising its projections that the economy is doing slightly better than it had projected last fall.

The fact that revenue forecasting is art as well as science was clear during the deliberations of the panel before it reported to the Appropriations Committee.

Mike Allen, a member of the panel and research director at Maine Revenue Services, said the models used in making the projections are subject to variables that can’t be quantified.

“Really, for the moment, we have punted in this forecast,” he said.

For example, Allen said, if Congress ends some tax credits at the end of this year, it may lead to some taxpayers making expenditures earlier than planned to take advantage of the break. He said there is also the unexpected that could cause serious problems with state revenues.

“If we have a spike in oil prices again, well, we all saw what happened last time,” he said.

The reforecast is not all good news. While the personal income tax is expected to yield an additional $15.4 million over the two-year budget, sales tax revenues are expected to slip further by $30.8 million.

What is driving the net increase in the projections is the corporate income tax, which is expected to generate $66.2 million more than thought in December’s forecast.

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