AUGUSTA, Maine — Improved state budget estimates combined with falling unemployment rates suggest that Maine’s long-suffering economy is beginning to lurch out of the doldrums, but a few caveats are also being issued.
A nonpartisan state panel of tax and economic experts on Tuesday gave its blessing to significantly improved revenue projections which suggest that Maine’s $1 billion-plus budget gap may not be that big after all.
The Revenue Forecasting Committee endorsed figures that shrink the shortfall through the next two-year budget cycle by more than $470 million, which could ease prospects of more deep budget cuts. The figures will be included in a report due Dec. 1.
The healthier revenues stem from improved forecasts of individual income taxes and corporate profitability, said Grant Pennoyer, director of the Office of Fiscal and Program Review and member of the forecasting committee. Economist Amanda Rector of the State Planning Office told the committee that wage and salary estimates are turning more positive, and by the end of 2013 employment should get back to pre-recession levels.
The upbeat news came as the state Labor Department reported that Maine’s preliminary unemployment rate was 7.4 percent in October, down from 7.7 percent in September and from 8.1 percent a year earlier. The number of unemployed totaled 51,100, down 6,000 from a year ago, state Labor Commissioner Laura Fortman said.
Fortman noted that unemployment declines over the last three months are due to a combination of factors, including modest job growth and people leaving the labor force.
Gov. John Baldacci credited “hard decisions made at the state and national level since the global recession began” in 2007 for the improved economic scenario. Action in Maine that laid the foundation for a recovery included holding the line on broad-based taxes, “smart and targeted investments” and government restructuring, he said.
Baldacci said companies in Maine, after shedding more than 30,000 jobs, are rebounding and profits are improving.
“While job creation is still lagging, Maine’s unemployment level is dropping. There are still too many people out of work, but at least the unemployment rate is heading in the right direction,” he said.
The Revenue Forecasting Committee’s upgraded figures are subject to a number of assumptions that aren’t guaranteed to bear out, according to a panel of experts from outside government that reports on key economic indicators.
The Consensus Economic Forecasting Commission said in a statement that the positive revenue forecasts are based in part on assumptions that tax cuts passed during George W. Bush’s presidency will be extended and that the Federal Reserve Bank will expand monetary policy support for the economy. The recurrence of the European debt crisis also looms as a potential influence on the positive trends, the Consensus Economic Forecasting Commission added.
“Perhaps more importantly, the uncertainty in the current economic climate is substantial,” the commission warned.