AUGUSTA, Maine — Revenues continued to come in better than expected in June and that has resulted in a revenue surplus of $49.2 million for the budget year that ended June 30. That will increase by another $3 million to $5 million when unspent appropriations are finally tallied next month, but the extra money is already obligated.
“It seems the revenue forecasting committee was a little conservative,” Finance Commissioner Sawin Millett said Wednesday. “To me, it is a very good turnaround in the last three months.”
He said while it is good news, budget law already allocates the first $33.8 million, with $25 million of that going to the state budget reserve. The other monies were set aside in smaller contingency accounts.
“This is certainly better than we had anticipated it would be three months ago,” Millett said in an interview. “It is good news and it hopefully is good news about the economy.”
Sen. Richard Rosen, R-Bucksport, the co-chairman of the Appropriations Committee said while he had expected a surplus, he did not expect one in the $50 million range.
“This revenue surplus is larger that what I expected, “he said. “I think it is encouraging news and that employment is solidifying.”
Rosen said he is still concerned that employment growth has been sluggish but he believes national trends may apply to Maine. He said nationally many employers have returned to full-time employment workers that had been part-time. He said one local barometer for him is the Verso paper mill in Bucksport.
“Two years ago there were a lot of rolling work stoppages,” he said. “That hasn’t happened in quite some time and now they are advertising and actually looking for more help.”
Rep. Emily Cain, D-Orono, the House Minority Leader, was co-chair of the committee last year. She said while the surplus is certainly good news, she is not sure the economy has really turned around.
“We need to see people who are unemployed, and have been unemployed, getting a job and going to work,” she said. “We need to see more jobs being created not just people working more hours.”
The revenue forecasting committee had reprojected revenues in April from a slightly more pessimistic economic forecast than the November projections. The personal and corporate income taxes continued to drive the revenue news with individual income taxes ending the budget year $22.6 million over estimates. The corporate income tax was $15.8 million above estimates for the year.
“It has produced a very strong turnaround and corporate profits continue to be probably the highlight of the just completed fiscal year,” Millett said.
He said nearly all of the state revenue lines ended the year in the black, with the service provider tax and the tobacco taxes the only taxes not exceeding estimates. He said the catch-all category of fines, forfeitures and penalties also was below estimates for the year.
After the $33.8 million set aside in the budget law for specific purposes, the remainder of the surplus is allocated by a percentage formula. Thirty-five percent will go to the state budget stabilization fund, often called the state’s Rainy Day Fund. The working capital fund gets 20 percent, and 20 percent goes to help pay down the unfunded liability of the state retirement system. The unfunded liability in the retiree health fund gets 15 percent of the surplus and 10 percent goes to the fund for state capital repairs and improvements.
“That means we will get about $32 million for the stabilization fund,” Millett said. “That will be very important to the state’s credit rating and the bond houses. They expressed concern at meetings we had with them earlier this year about the lack of reserves.”
He said when the additional cash is added to existing reserves the state stabilization fund will have about $60 million.
Rosen agreed that will be good news for the credit rating firms. He said members of the committee have been concerned about the reductions they had to make in the reserves to fund two emergency budgets earlier this year.
Cain said the state clearly should have moved to put a bond package before voters this session so that they would have been passed and available to help create jobs in the new year. She said the improved state fiscal condition would have helped the state get a good interest rate that may not be as good a rate a year from now.
The final surplus numbers will be finalized next month and funds transferred to the various accounts as determined in the budget law.