AUGUSTA, Maine – State revenues were $200,000 below estimates in March, but the red ink would have been considerably more if a one-time estate tax payment of $5.8 million had not been made during the month.
“I don’t look at March as a very positive month,” Finance Commissioner Sawin Millett said Wednesday in an interview. “I am more interested in what happens in the next week as we process income tax filings.”
He said the later filing time this year for returns coupled with the Tuesday shutdown day will delay the processing of income tax filings until later in the month than usual.
“Those will be crucial numbers as we go forward with preparation of a change package for the budget,” he said. ”They will also be very important to the Revenue Forecasting Committee when they meet next week to re-project revenues.“
He said the overall state surplus is now $21.7 million with three months left in this budget year. He said both the personal income tax and the corporate income tax were below estimates in March, but both are ahead of projections for the year to date.
“The indications I have are that the April revenues, for the first two weeks, were pretty much on target,” he said. “The critical period is that last few days of processing filings and what they show. We could be looking at some less than optimistic news when the forecast is generated.”
The names on estate tax forms are confidential under state law, so it could not be disclosed where the $5.8 million payment came from.
Millett said there are other “red flags” in the state revenue report. For example, the catchall “other revenue” category is below estimates by 21 percent and the revenue from fees, fines and forfeitures is 11 percent less than estimated. Those categories together are expected to being in more than $90 million this budget year.
“We are seeing some improvement this month in lottery revenues which have been below estimates most of the year but were up in March,“ he said, “but they are still under budget for the year by over $2 million.”
Rep. Pat Flood, R-Winthrop, House co-chairman of the Appropriations Committee, said he had been hoping for better news than state revenues basically on target. He said committee members have been hoping for two items of good news to help them in balancing the biennial budget.
“We were hoping for some changes in the calculations from the pension system and we got that last week,“ he said, “and I think we were hoping for a boost of about $50 million over the biennium in revenues and I can’t say that is looking all that positive.”
The state retirement system board changed its assumptions in some key areas, reducing its original request for state funds by $85 million.
Flood said March revenues are “disappointing” but he hopes when all of the income tax filings are tallied the state will see an improvement in revenues that will carry forward into the next two years.
“I don’t know if I can guess now that we will see that.” he said. “That will make our job harder for sure but again it’s not over until it’s over and the revenue forecasting committee meets next week and we will see what they have to say.”
Rep. Emily Cain, D-Orono, is the House minority leader and was House co-chairwoman of the panel last session. She remembers well the “April surprise” when income tax revenues fell dramatically during the recession.
“That is something I will never forget,” she said. “During my time on the Appropriations Committee we had both good and bad April surprises, and when they are bad, they can really bite you.”
Millett said sales taxes continue to come in above estimates, even though he and others have expressed concern about the impact of energy prices on disposal income. He said the various categories of sales taxes are mixed with some above estimates and others below. Sales taxes were up nearly a million dollars in March and are above estimates by $12.9 million so far this year.
“I got to be concerned that people will not be spending on stuff if they have to put more and more out there for gasoline,” Flood said.
Cain agreed. She said the heating season has stretched longer than usual and that coupled with high gasoline prices, she worries whether the sales tax will continue to meet projections.