AUGUSTA, Maine — Revenues continued to exceed estimates in April and that good news was used as state officials met with bond rating firms in New York City earlier this week in anticipation of a $58 million bond sale later this month.
“We had the preliminary numbers and we shared them in the meetings,” Finance Commissioner Ryan Low said Wednesday. “We addressed all the issues that they put forth when they put out that negative watch in March.”
Those issues included whether state revenues would meet estimates after months of not doing so in 2009 as well as passing a state budget and setting aside cash for future budget problems. Low said revenues are $33 million above estimates with two months left in the budget year and are on target to create a surplus of at least that amount.
Standard & Poor’s put the state on a watch list when bonds were being sold in March by the Maine Governmental Facilities Authority. They revised their outlook on the bonds from stable to negative, a step that could lead to a downgrading of a state’s credit rating.
“We think we made a good presentation that addressed those concerns,” Low said. “We passed a bipartisan budget; we have set aside now $14.2 million in reserves in a very tough economy.”
Gov. John Baldacci said Wednesday he is encouraged by state revenues meeting estimates and the impact that has on the state’s credit rating, but he still worries about the economy and the potential impact of higher energy prices.
“I don’t think we are out of the woods yet,” he said. “But I am encouraged about the economy when I talk to employers and to workers across the state.”
Baldacci praised lawmakers for passing a budget without the gridlock found in other states and said that helped in the state’s presentation to the bond rating firms.
State Treasurer David Lemoine was on the New York City trip and agreed with Low that the sessions with the rating firms went well.
“We had a good story to tell and the fundamentals are strong in our state,” he said Wednesday. “We have been able to govern ourselves and pass budgets with bipartisan support, unlike many other states.”
Lemoine said in addition to visits with analysts at Standard & Poor’s and Moody’s, the traditional rating agencies, he has sought a rating from the National Association of Insurance Commissioners. He said the nonprofit group has a unit that analyzes and issues ratings for securities sold by insurance companies.
“This is a first,” Lemoine said. “I asked them if they would consider rating us so that we can try to get a broader range and I think a more accurate representation to the investing public of the true security of a Maine bond.”
He acknowledged that might “shake up” some of the ratings firms because they have long had the field to themselves. He said the rating firms have “diluted” the strong constitutional protection for Maine bonds. Under the state constitution, debt payments have priority over all other spending — the treasurer is authorized to use any cash on hand to pay bond debts first.
“I am bringing in this other rating agency, which gives much higher weight to the true risk of default, which I think will help us in the long run in getting a better rate for the dollars we borrow,” Lemoine said.
Low said he was particularly pleased to see sales tax revenues above estimates by $5.7 million. He said that for the first time in 18 months sales tax revenues exceeded projections.
“Maybe it shows that we have hit the bottom and we are starting to bounce up a bit,” he said. “Maybe it shows a little increase in consumer confidence.”
Low said the income tax is on budget for the year after higher than projected income tax refunds. The personal income tax is the largest single tax source for state government, projected to bring in just under $1.3 billion of the $2.7 billion in overall revenues this budget year.
Low said the corporate income tax continues to surprise. It is projected to bring in $147.7 million this year and already has brought in $137.9 million with two months to go and was $4.5 million above estimates in April.
“This is something that a lot of states are seeing,” he said. “It shows that corporate profits are doing very well.”
The bond rating firms are expected to release their ratings next week and the state plans to sell about $58 million in bonds the following week.