AUGUSTA, Maine — State revenues continue to exceed estimates with preliminary May numbers indicating as much as $10 million over projections.
Finance Commissioner Ryan Low said Tuesday the budget year surplus projection is now about $40 million. Mike Allen, director of research at Maine Revenue Services, said all three major revenue sources for the state are doing better than projected earlier this year.
“Individual income taxes will be over for the month by $6 million or so,” he said. “Corporate income tax receipts will again be over budget, probably by about $4 million for the month. Sales taxes had another strong month, probably over by $5 million or so.”
Allen said those increases were offset to some extent by other revenues not meeting estimates. For instance, the estate tax appeared to be about $1 million below projections.
He said last Friday’s shutdown day complicated the end of the budget month and revenues received on Friday would be “booked” for May.
“There could be some changes as we adjust for what may have come in on Friday,” Allen said. “But we don’t expect any major changes.”
He said the sales tax increase could be a result of the early warm weather with purchases pulled forward as homeowners bought materials for repairs and did some yard work early.
“But when you look nationally, consumer sales in general have picked up,” he said. “I think we will end the year with sales tax above estimates.”
Allen said he has been tracking the national economy because it has a major effect on the state’s economy. He said it is still a “shaky or fragile” economy and could get stalled by any of a number of factors like a spike in energy prices, a major storm or other natural disaster.
He said many companies, both small and large, are still reluctant to invest and expand because of the slowness of the economic recovery. He said many want to see “a few more months” of increased consumer spending before they invest.
“This is really good news,” said Sen. Bill Diamond, D-Windham, co-chairman of the Appropriations Committee. “We are seeing several months now of revenues above estimates and that is so much better than what we were looking at not so long ago.”
He said for the first six months of this budget year, revenues rarely met estimates and state forecasting officials twice changed estimates. He said he is particularly pleased to see the sales tax exceeding projections for several months is a row.
“The sales tax above estimates tells us people are more confident and they are willing to spend,” he said. “That’s an indicator I always watch and it is going in the right direction and for that I am very happy.”
Sen. Richard Rosen, R-Bucksport, is the GOP senator on the panel. He said while the revenue numbers are encouraging, he still looks at them with caution after the wide swings of the last few years.
“Let’s keep our fingers crossed and hope it continues,” he said. “We were looking at month after month of revenues not meeting expectations, so it is good to have these last few months all positive.”
Rosen said he agrees with Allen that the economy is “fragile” and any number of national or international events could have a serious effect on the state and national economy recovering. He said much of the economic activity in the state is connected to both national and international markets.
Rep. Emily Cain, D-Orono, the House co-chairwoman of the committee, said while she is pleased that revenues are above estimates, she shares the concern that the national economy — and therefore Maine’s economy — still has a long way to go recover lost ground.
“One of the things we should be doing going forward is to get our forecasting piece in line with what will actually happen, to make our forecasting better,” she said. “We were in free fall there for a while and the forecasts were way off.”
Cain said the state should not wait for another recession or economic downturn to improve its ability to forecast state revenues.