AUGUSTA, Maine — Members of the state revenue forecasting committee are slightly scaling back revenue projections over the next two years, creating an additional $14 million hole in the state budget that will have to be filled by a yet-to-be-released supplemental spending plan.
The latest decline in revenue further complicates the establishment of a final dollar amount for the supplemental budget, according to state officials.
“With a problem of that magnitude, you don’t find it all in one place,” said Finance Commissioner Sawin Millet. He said his office is working on a supplemental budget to be introduced next month that will find the funds to offset reduced revenues and address several other smaller budget needs.
“We have a problem with the heating oil budget for this complex of state-owned buildings,” he said. “We know we have flood assistance money that is owed municipalities.”
Millett said there are several other accounts that will need to be addressed, as there always are in the traditional supplemental budget. He said issues in this budget year can be addressed with one-time resources, such as the $5.7 million going into the state general fund from a multistate settlement with several large national banks over improper mortgage deals. But holes in the second year of the budget will require cuts in state spending.
“This won’t be easy but I think we can get it done,” he said.
Millett said a reprojection of revenues was expected after January revenues came in significantly below projections. Revenues were $38.7 million below estimates that had just been made in November.
Jerome Gerard, state tax assessor, is chairman of the forecasting panel, which includes state officials and other economists. He said they slightly adjusted downward the income taxes expected to be collected in the two-year budget cycle. Much of that was offset by projected increases in gambling revenues from casinos and from additional fine collections.
“I think we proceeded with caution, try to be conservative given the geopolitical tensions throughout the world,” he said.
Concerns over the increased price of oil and its potential impact on state revenues were a theme throughout the committee meeting.
Mike Allen, associate commissioner of finance, said when the revenue projections last were done, oil was trading at $89 a barrel, well below the $106 per barrel level oil is trading at this week. He said a major spike in energy costs for Mainers likely would affect several state revenue lines significantly and result in further loss of revenues.
“A year ago gasoline cost about 40 cents a gallon less than it does today,” he said. “There are a lot of people out there talking about it going to $4 a gallon and that will have an impact.”
Millett agreed. He said state revenues can be greatly affected by national and international events, whether natural disasters or man-made.
Lawmakers often look to the sales tax as an indicator of the health of the economy because consumer spending often is a measure of whether consumers have confidence in the economy and their ability to afford a new car or television set. Sales taxes have been slightly below projections, but only by a slim margin of less than 1 percent.
“The holiday season, for most stores, was not spectacular,” Allen said. “The more higher-end stores only had 3 percent growth.”
Rep. Patrick Flood, R-Winthrop, co-chairman of the Appropriations Committee, said he was not surprised at the revenue reprojection.
“It’s not as bad as it could be,” he said, “so we are thankful for that.”
Flood said he is “confident” that Millett will come up with the funds needed through savings and cuts to make sure the budget is brought into balance through the supplemental budget.