AUGUSTA, Maine — While Maine state government has closed its books for the last fiscal year nearly $50 million in the black, the picture ahead is clouded by questions about fuel prices and uncertainty over the federal debt ceiling, lawmakers were told Wednesday.
Figures presented to the Appropriations Committee showed the state finished fiscal 2011, which ended June 30, with general fund tax revenues over budget by $48.9 million, or 1.7 percent over the projected figure.
While total revenues for 2011 showed solid growth of 6.9 percent over the previous year’s total, the total of nearly $3 billion still lagged below the prerecession peak reached in fiscal 2008, said Michael Allen, econometric research director for Maine Revenue Services.
The picture ahead is also fraught with uncertainty, Allen told the committee at its monthly meeting.
The start of the new fiscal year has seen higher energy prices, and a continuation of elevated prices into the home heating season would add financial stress on Maine families. That, in turn, would affect state sales and use tax revenues, Allen said.
Early indications for July show that sales and use taxes, which comprise large portions of state revenues, are under budget, he added, creating concerns that the state may not take in as much money as forecasters had predicted.
Analysts also conclude that a lot of the over-budget revenues already counted came from taxpayers with higher incomes, suggesting that lower- and middle-income households remain stressed by higher food and energy prices, Allen said. National trends are also a concern.
“The national economy has not grown as much as people thought it would between January and June,” Allen said. A continuation of current trends does not bode well for job creation, he said.
Responding to a question from the committee, Allen said the effects in Maine from of the national debt crisis are difficult to augur.
“The problem is that nobody knows exactly how the federal government’s going to react, or when it’s going to react,” Allen said. “It depends on which payments federal government decides it’s not going to make, should that be an issue.”
For example, the effect might be less if a large share of cuts affected federal employees because Maine doesn’t have a large base of federal employees. But cuts or delays to Social Security could have more of an impact in Maine, he said.
Finance Commissioner Sawin Millett told lawmakers that preliminary contingencies are in place should Congress fail to raise the debt ceiling before an Aug. 2 deadline to prevent potential defaults. Millett said his department, the state treasury and Gov. Paul LePage’s office have been closely monitoring “what’s not happening in Washington on a day-to-day basis.”
With a cutoff of federal funds to Maine programs, the state could first dip into the treasurer’s cash pool to make up for losses, a contingency that could last only two to four weeks. Following that, the governor has the power to curtail funding for state programs, Millett said.
While it’s unclear what programs would be most likely to be affected, Millett said he would not expect Social Security to be the first to face cuts “and probably [would be] the last.”