AUGUSTA, Maine — The roller coaster of state revenues continues. In January, revenues were $38.7 million below estimates, raising concerns whether the estimates made last November will need to be revised downward later this month.
“That is a concern,” Finance Commissioner Sawin Millett said in an interview. “Both sales and use, the individual income and the corporate income lines were down substantially.”
After starting the budget year in the red, revenues improved through the first half of the budget year and were in the black in December. Millett said the January numbers were so far below estimates that year-to-date revenues are now $29.8 million below projections.
“We moved out about $15 million in individual income tax refunds in January more than in previous years,” he said. Millett said that does not account for all of the $23 million shortfall for the month in the individual income tax and it is also a concern.
The corporate income tax, which has been above projections for over a year, was way off. In November it was re-projected to bring in $12.2 million in January, but brought in only $5 million. It is now $1.5 million below estimates after seven months of the budget year, after exceeding estimates for each of the first six months of the year.
Millett said it has always been difficult to accurately project corporate income taxes because some corporations file on a calendar year and others file on their own budget year. He said it is a concern that after months of always exceeding projections, the tax was so sharply down in January.
“It is good news that year to date we are still very close to estimates on the corporate line,” he said.
Millett said he does worry that the sales tax not meeting the modest expectations made for December could indicate consumers are still worried about the economy and not spending as expected. Holiday sales tax collections from December are reported in January.
“That has been one of my concerns all along,” said Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the Appropriations Committee and a former co-chair of the panel. “The sales tax reflects consumer confidence in the economy and it has not been strong all year.”
She said many members of the committee have been watching the increase in energy prices over the last several weeks, with home heating costs rising. She said as families have to spend more to stay warm, they spend less on discretionary items such as going out for dinner or buying a new appliance.
“This will make what is already a difficult job all the more difficult,” she said.
The committee has just finished work on a measure to pay the Medicaid bills for this budget year that is under consideration by the full Legislature. They expect another supplemental budget bill to address other shortfalls such as the cost of heating state buildings. If revenues continue below estimates, Millett said, any revenue problem will have to be addressed in that budget proposal.
“The January revenue report is bad news,” said Sen. Richard Rosen, R-Bucksport, co-chairman of the committee. “The economic forecasts for Maine continue to signal extraordinarily slow job growth and until we have some significant job growth we will not have significant growth in state revenues.”
He agreed with Rotundo and Millett that if the revenue forecast later this month reduces the projections for tax collections for the rest of the year, the committee will face a difficult task to make the cuts needed to bring the budget into balance.
Millett said not only are the major revenue sources down so far this year, some of the smaller sources are down and others are struggling to meet estimates. For example, lottery revenues are above estimates by $916,000 so far this budget year, not much of a cushion with the total for this year projected at $50.7 million.
Millett said he does not expect some of the lesser sources to improve, such as the money the state receives from fines and penalties. It is 8.3 percent below estimates so far this budget year, which is $1.2 million below projections.
“Some people just can’t pay the fines they owe in this economy and that is being reflected in this line all year,” he said.
Millett said he believes Maine Revenue Services will have a “good picture” of February tax receipts for the revenue forecasting committee to use when they re-project revenues later this month.