State revenue projections increase by $365.5M

Posted Nov. 23, 2010, at 8:20 p.m.
Last modified Nov. 24, 2010, at 7:37 a.m.

AUGUSTA, Maine — Gov.-elect Paul LePage got some good news from the state’s revenue forecasting committee Tuesday as revenues were re-projected to go up $111.6 million this budget year and $365.5 million for the two-year budget that begins July 1.

“I’m a lucky guy,” LePage said when told of the forecast.

He said the additional revenue would make it easier to pay debts owed to Maine hospitals, which he called a “high priority.”

LePage also acknowledged that the additional revenue will make it easier to fund a supplemental budget to get the state through the current budget year.

“We’re working on that, our budget transition group,” LePage said.

Gov. John Baldacci hailed the re-projections as an indication that the economy is improving. He said reduced state spending has been a factor, with the current state general fund budget at $2.69 billion, only slightly more than spending in 2001, which was $2.65 billion.

“After shedding more than 30,000 jobs, companies in Maine are rebounding and profits are improving, especially for large, multinational corporations,” Baldacci said in a statement. “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.”

The income taxes, both individual and corporate, are driving the projected increase in state revenues. Mike Allen, research director at Maine Revenue Services, said corporate revenues have grown significantly greater than projections that were made earlier this year.

“We have seen the corporate tax come in above estimates all year,” he said. “That trend is continuing.”

Jim Breece, an economist at the University of Maine, serves on the forecasting committee and cautioned that the increased corporate revenue is due to how Maine assesses the corporate tax, not because of an improvement in the profitability of Maine corporations.

“This is not an indicator of the robustness of the Maine economy,” he said. Allen agreed. He said 60 percent to 70 percent of the corporate income tax revenues are from national and multinational corporations.

The group also concluded that the individual income tax will continue its slow growth. Jerome Gerard, the acting state tax assessor, is the chairman of the group. He said the individual income tax made up $43.3 million of this budget year’s growth and the corporate made up $41.7 million of the increase. The sales tax revenue projection was kept the same for the rest of the year.

“What we have done is based on assumptions of what Congress will do,” he said. “We have to assume they will extend the tax cuts.”

Not all revenues are expected to increase. For example, the tax on cigarettes and tobacco products is expected to decrease slightly over the next 30 months. Lottery revenues are projected to be flat.

“This is certainly good news, but we still have a huge budget gap to address,” said Sen. Bill Diamond, D-Windham, the outgoing co-chair of the Appropriations Committee. “We have some major budget issues to address besides the hospitals. We have the unfunded liability [in the retirement system], which is now over $500 million, and school funding and a lot of other priorities that we have to look at.”

He said it is fine for the governor-elect to set his budget priorities, but Diamond said it is the Legislature that will determine the budget after the public has its say and lawmakers weigh the competing priorities.

“Yes, this is good news with all of the budget problems we face,” said Sen. Richard Rosen, R-Bucksport, the only GOP senator on the outgoing committee. “But this does not solve our budget problems.”

Rosen agreed with Diamond that the new Legislature will face a long list of budget requests from agencies to meet current obligations in a supplemental budget, and the list grows even longer for the items in the new two-year budget.

“I think we have to be extremely cautious as we go forward,” he said.

Both Rep. Robert Nutting, R-Oakland, the GOP nominee for speaker of the House, and Sen. Kevin Raye, R-Perry, the GOP nominee for president of the Senate, say they are giving high priority to naming the members of the new Appropriations Committee early in December.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business

Similar Articles

More in Politics