AUGUSTA, Maine — The state’s Consensus Economic Forecasting Commission says Maine’s economy will continue to grow very slowly for the rest of this year and next, with significant growth at least two years away.
“The pessimism-optimism balance has changed and has changed for each of the two years we are looking at,” said Charles Colgan, chairman of the commission and an economics professor at the University of Southern Maine. “We did raise our forecast a little bit for employment growth in 2010. We had been very pessimistic about it and we do see a little more recovery there. But in 2011, we are more pessimistic.”
That will translate into a little more revenue this budget year and possibly a little less in the next budget year. Those numbers will be provided by the Revenue Forecasting Committee when it meets next month to review the economic forecast and revise their projections based on their revenue modeling.
“We look at personal income in our forecast,” Colgan said. “But, almost all of the income gains in the national economy in the last two years have been on the business side.”
Mike Allen, research director for Maine Revenue Services, said the projections earlier this year of corporate income taxes were “way off.” He said last January the national projection was 9.6 percent growth of corporate revenues in 2010.
“They are now predicting an increase of 35 percent,” he said. “Corporate profits on the whole are continuing to do better than expected.”
Allen said corporate income taxes have been above estimates for over a year and continue to exceed projections. He said that has been the source of much of the state revenue surplus and the trend appears to be continuing.
Allen said the way Maine taxes corporations has allowed the state to benefit from the overall growth of a national or international corporation.
“I would say that the top 25 corporate taxpayers account for 50 to 70 percent of the corporate income tax revenue for the state,” Allen said.
Allen serves on the revenue forecasting group and expects the corporate income tax forecast will be increased, but did not say by how much. He said state revenues, while slightly above estimates and above last year’s levels, are still below those of two years ago and is an indicator of how hard the state has been hit by the recession.
Glenn Mills, an economist with the Department of Labor, said the job outlook appears to have turned a corner at the first of the year, with job levels fairly stable. But, he said, instead of growth in jobs, the state has been “bumping along the bottom” with no real upward momentum.
“The unemployment rate is down, but that is really due to a decreasing labor force and not because of rising employment,” he said.
The panel discussed specific employment areas, and some occupations have seen a little growth while others continue to lose workers.
“Leisure and hospitality is still bouncing around all over the place,” Colgan said. “Construction was down 800 or 900 jobs. Others are up a little or down a little.”
Mills said the recession has cost the state 34,000 jobs through September, although he believes the numbers will improve this month. He also said those who are working are often working longer hours than before the recession with some making less pay.
“We have seen job postings up this year over 2009,” he said. “But they are still below the 2008 levels.”
Mills said another telling statistic is that total wages paid in the state for the first half of 2010 are just about the same as the first half of 2009. But they were $387 million lower than the first six months of 2008.
The commission is expecting job growth of a little over 1 percent next year. That translates into about 6,000 jobs.
Colgan said the panel is making the assumption, as are other states, that Congress will extend the tax cuts set to expire Dec. 31. Some of the cuts were part of President Obama’s stimulus package; others go back to President George W. Bush.
“If they don’t, we will have to revisit this and revisit it substantially,” he said. The state estimated earlier this year that Mainers would face a $550 million tax increase in 2011 if all of the cuts are allowed to expire.