State sees revenues declining
11/17/08 | 19 comments

State sees revenues declining


Property values falling along with tax income
By Mal Leary
Capitol News Service

AUGUSTA, Maine — Maine governments are facing a triple whammy in the current recession, with the three major sources of revenue for state and local governments all in decline, as well as other revenues, something that has not happened in decades.

“We are seeing the income taxes, the sales taxes and property values all go down in this downturn,” said Maine Revenue Service chief analyst Mike Allen. “We have not seen that in a long time.”

But, he said, Maine may not be as hard-hit as some other states. He said history indicates Maine tends to take longer to feel the effects of a recession, and that the impacts are not as deep but tend to last longer in the state.

“That’s true,” said University of Southern Maine economics professor Charles Colgan. “But, we don’t know if that will be the case this time.”

Colgan also serves as chairman of the Consensus Economic Forecasting Committee. That state group is projecting wage and salary employment will be down seven-tenths of a percent in 2009, but will start to grow in 2010.

The state gets more than two-thirds of its revenue from income taxes and the sales tax, and neither is meeting projections made in June. Allen said state revenues will be as much as $150 million below estimates for this budget year, and that could grow if efforts to stabilize the national financial markets are not successful.

“While there are differences in Maine, the national trends are still the big force in Maine’s economy,” he said.

Both Colgan and Allen said what makes this recession more difficult for state revenues than the 2001 or 1991 recessions is that in both only one of the major taxes took a big hit.

“In 2001, we certainly took a big hit on the income tax,” he said, “but sales tax revenues held us up. Interest rates were low, there were big promotions to sell cars, and people were still buying things. That is not true this time.”

Allen said the mortgage foreclosures and plunging property values in other states will have an impact in Maine, but said local municipalities can raise tax rates to make up for lesser property values.

Geoff Herman, director of state and federal relations with the Maine Municipal Association, said the annual growth in value has come to a halt, but he has not seen the actual property value decreases reported in other states.

“I think we will see some as properties are sold and we get that sales data,” he said. “We may also not see as big an impact as other states because we do not do revaluations as frequently as some states.”

A property tax bill has two components: the value of the property and the rate of the tax set by the city or town. While municipalities have been able to see revenue growth without raising the tax rate, Herman believes those days are over and local officials are looking at budget cuts to avoid raising rates.

“Some municipalities have not revalued properties, and when they do they will see the impact of lower values,” he said. “Others, like the city of Bangor, look at comparables every year and set their property values with them.”

Property values are figured using two methods. One is where professional assessors visit each property and assess a value based on both location of the property and its condition. For example, building a new attached garage would add to the value of the property.

The second common method is to use the sales of properties in a neighborhood to assess the value of other properties in that neighborhood. That is the “comparables” used by Bangor in assessing values.

Local governments also are being hurt in other revenues they count on to pay for municipal services. For example, they get a 5.1 percent slice of the state income and sales tax revenues, and they have seen the amount of dollars they get go down as those revenues have lagged behind projections.

“We know they will fluctuate,” Herman said. “We benefit when revenues are better than expected, so we know we also will be hurt when they fall.”

Of greater concern, he said, is the precipitous drop in vehicle excise tax revenues that has hit cities and towns very hard.

“Car sales are down by 50 percent,” he said. “That is hurting a lot of municipal budgets.”

Colgan said even with the broad impact of this recession, he and other members of the economic forecasting commission see growth in Maine’s economy and an increase in jobs starting in late 2009 and early 2010.

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Comments
19 comments on this item
On 11/17/08 at 5:53 AM, Govt2Big wrote:         Repeated separate thumbs down will cause comment to be hidden

Since revenues are declining, do you think our current state leaders will wake-up and reduce their poor spending habits? That's very doubtful, but I encourage all concerned residents to review past state expenses at http://www.maineopengov.org.

In addition, since it looks like our economic situation in Maine will get worse before it gets better, what about that $20 million our governor took for the failing Dirigo program? If you didn't see that story in the Portland Phoenix newspaper, it's a MUST READ at:

http://thephoenix.com/Portland/News/70044-Baldacci-raids-the-cookie-jar/?page=1#TOPCONTENT - it's called "Baldacci raids the cookie jar" and warrants further investigation.

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On 11/17/08 at 6:42 AM, downbeat wrote:         Repeated separate thumbs down will cause comment to be hidden

This is news...We just reelected the biggest spenders to office...what do we expect...do you think they will do the right thing.....take away health insurance from the legislature for starters....freeze the maine state retirement system....make the employee benefits more like the private sector...get rid of the waste....we need to get involved and inform our representatives of ways they can cut and set priorities..

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On 11/17/08 at 7:59 AM, jgordon wrote:         Repeated separate thumbs down will cause comment to be hidden

Want to save some money? Want to balance this years budget with forecast revenues? Cancel the new schools in Hampden ($59,000,000), Ellsworth ($30,000,000), and Brewer ($39,000,000) for a total of $128,000,000 in savings for these unnecessary expenses! Then rehab the old schools for $10,000,000 leaving a grand total of $118,000,000 in savings while still providing a suitableand more than adequate education. Stop thinking about performance art centers in schools and don't let older schools decline by ignoring their maintenance so you can justify a new school at these outrageous prices! Education is a sacred cow that nobody dares to criticize but the time has come to provide an education, not a monument to fiscal stupidity!

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On 11/17/08 at 8:06 AM, thekingofmaine wrote:         Repeated separate thumbs down will cause comment to be hidden

I have said this time and time and time again

ITS TIME TO IMPEACH BALDY BALDACCI HURRRRRRbody

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On 11/17/08 at 8:09 AM, thekingofmaine wrote:         Repeated separate thumbs down will cause comment to be hidden

jgordon...how about we cancel Maine?

I think taht would make sense... burn it to the ground, rebuild with luxurious indian casinos and wtf not... throw in DisneyMaineland, where people can tour the logging industry in fashionable single-engined airplanes..

no but seriously - we could do much better than depend on our manufacturing and logging industry. instead of women with farmers tans we could have showgirls, and more divas...as governor I would approve that a stripbar/casino be built in the Blaine House...everyone is welcome except the gays...they kind of make everything ....welll... gay.

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On 11/17/08 at 8:10 AM, JWBooth wrote:         Repeated separate thumbs down will cause comment to be hidden

The best way to kill a tumor is to cut off its blood supply.

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On 11/17/08 at 8:18 AM, thekingofmaine wrote:         Repeated separate thumbs down will cause comment to be hidden

JWBooth i like how you speak...

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On 11/17/08 at 8:27 AM, LincolnMOM wrote:         Repeated separate thumbs down will cause comment to be hidden

It is just a recession...which is a temporary fluctuation of the economy. It will come around within a year the experts have predicted. The politicians need to take some cut backs that would be a start!

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On 11/17/08 at 8:44 AM, Bangorian wrote:         Repeated separate thumbs down will cause comment to be hidden

JGordon - I actually agree with you about the education issue. For some reason (perhaps becuase they have a powerful lobby), we've allowed the educational system to become bullet proof. Most teachers I know make great salaries despite the fact that they don't work during the summer, have every holiday and weekend, don't work in excess of 40 hours/week (despite what you might hear), have big retirement plans and comprehensive health care. I think we should re-examine educational costs and salaries for what are essentially9 month/year posiitons

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On 11/17/08 at 9:21 AM, CeeBlue wrote:         Repeated separate thumbs down will cause comment to be hidden

--And while our local governing body continue to reward the powerful education lobby [ see jgordon and bangorian ] , Nancy Pelosi , Harry Reed and the rest of the Obama gang are making courtesy calls to Snowe and Collins to bail out yet another powerful union.

**Collins and Snowe [closet Dems.] --will vote to waste your money on Detroit

The liberals are in power - it is their checkbook - this state, this country has spoken----incredible !

How does the least effective legislator of his era get to be governor ! ?

Be a democrat - live in Maine.

----incidently---, temps to be in the mid 80's today in AZ.. --- I've made my decision.

Maine -- a great place to be from.

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On 11/17/08 at 10:03 AM, pjramsay wrote:         Repeated separate thumbs down will cause comment to be hidden

I have to agree that the school construction business has gotten out of hand. But I do know a lot of teachers. Most work well into the evening every day. And they spend our of pocket for supplies that the schools can't afford. Readjusting their retirement, along with state workers is not a bad idea.

For those pounding your chest and blaming this mess on the "liberals." The Bush administration started our their crusade against working America with a budget surplus. The Republicans controlled the White House, the Congress and the Judicial System for 6 out of the last 8 years. This mess didn't happen overnight. Now, our fiscally conservative republicans have put us into a recession with an $11-trillion Visa card to pay off.

If the incoming administration focus' on jobs, jobs, jobs, we might have a chance here. Let the banks that we have already bailed out bail out the auto industry. Force the auto industry to build cars that we need.

Take Brunswick NAS and turn it into a U.S. owned oil refinery.

Cancel Postal Service on weekends (all I get on Saturday's is flyers).

Reduce government spending across the board (including federal salaries).

Re-negotiate NAFTA....it doesn't work.

Increase import taxes on companies that have closed U.S. factories and moved off-shore.

Order Iraq to sell us oil at $20 cash and $40 credit towards their war debt. Imagine what that would do to the cost of a barrel of OPEC oil.

Void all unused oil leases in the U.S. . Bid these leases out with a 120 day activation policy. After 120 days the leases are up for bid again.

If we all come up with just a few ideas we can turn things around. We must also act together, irregardless of who we voted for. We have no choice.

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On 11/17/08 at 10:05 AM, Philster wrote:         Repeated separate thumbs down will cause comment to be hidden

When the state leased the liquor business they received $125 million for 10 year lease which is $12.5 million PER YEAR. Profit sharing is also included which was only $5.5 million for 2007 according to the Bureau Of Alcoholic Beverages. This money goes to the general fund.

When the state had liquor stores the average money that went into the general fund from 1986-2004 was $28.8 million PER YEAR. It was $1,713,348 in 2005 and $25,653 << not a misprint in 2006.

And you wonder was the state has no money.

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On 11/17/08 at 10:10 AM, David889327 wrote:         Repeated separate thumbs down will cause comment to be hidden

JGORDON for Governor!

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On 11/17/08 at 10:48 AM, usafbangormaine wrote:         Repeated separate thumbs down will cause comment to be hidden

no wonder GM is going under...look at what their union did, employees were making way more than they could compensate for...unions suck

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On 11/17/08 at 10:51 AM, Bangorian wrote:         Repeated separate thumbs down will cause comment to be hidden

Good ideas PJramsey

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On 11/17/08 at 1:51 PM, UPLANDER wrote:         Repeated separate thumbs down will cause comment to be hidden

TIME FOR TAXES AND FINES TO GO, GOOD JOB SPAGETTI HEAD

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On 11/17/08 at 3:44 PM, PabMainer wrote:         Repeated separate thumbs down will cause comment to be hidden

Have no fear my friends, OBAMA is HERE!

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On 11/17/08 at 4:00 PM, jgordon wrote:         Repeated separate thumbs down will cause comment to be hidden

I don't mind if the self proclaimed King of Maine critcizes my idea's (at least I think he was???). Afterall that's what this venue is all about. A nice, poite environment for the exchange of idea's which hopefully stimulates a healthy discussion from which we all learn something. That said, I would urge participants like the Annoited one to put their glass down for a few hours before contributing. Your Majesty's response was incoherent and surely doesn't reflect well on the intellectual capabilities of Your Greatness. While pondering that situation one has to wonder if the King has a roomate named John Wilkes.

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On 11/18/08 at 12:14 PM, nicole wrote:         Repeated separate thumbs down will cause comment to be hidden

maybe all you teacher trashers out there, would rather have our children taught by any one walking in for a job application off the street. After all, anyone can teach right? Why should teachers have to spend thousands going to school to get their educations and be required to continue their educations as a requirement for certification...since we only work nine months out of the year. What do you propose fair compensation for getting a BA, and a MA and continuing to update your training and content knowledge?

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