AUGUSTA, Maine — State revenues were $12.6 million below estimates in October, putting the overall revenue picture in the red by $6.7 million for the first four months of the current budget year. The situation isn’t as bad as it appears, however, according to the state’s finance chief.
“When I looked at the bottom line, down $12.6 million for the month, I was concerned until I got the detailed explanation and analysis of what happened in October,” said Finance Commissioner Sawin Millett. “It is not as bad as it first may appear.”
He said most of the red ink was in the corporate income tax, $7.9 million below projections, after performing well over estimates for several months. He said more businesses filed for extensions for filing their returns than expected and when they did file in October, they were for smaller refunds than expected.
“That’s a good indication for the future,” he said.
Millett said some of the red ink in October was due to the state making payments under the property tax relief programs that were greater than projected. He said those programs are the individual tax and rent relief program as well as the Business Equipment Tax Reimbursement program.
“I know it gets confusing when we talk about estimates and projections,” he said. “So it is important to look at actual numbers year to date compared to a year ago, and that is good news.”
Compared to the first four months of the last budget year, overall revenues are up $11.6 million.
Millett said that is one indication that the economy is improving, although slowly. He said the sales tax is performing significantly better than for the same period a year ago, up 6.2 percent.
He also said the individual income tax is performing better than it was over the first four months of the last budget year, up 2.7 percent.
“I think we are seeing a slow, steady improvement and we just don’t quite have the spark yet to lift us up,” said Sen. Richard Rosen, R-Bucksport, co-chairman of the Appropriations Committee. He said anytime the revenues fall below projections, even for just one month, it is a concern.
“I think we are in a period of ups and downs and we need to look at the trends,” he said. “When we do look at the trends I think we are seeing there is some improvement.”
Rosen said he is concerned that action, or lack of action, by Congress on federal debt reduction will have a significant effect on state revenues. Millett agreed.
“What we have to do when we reproject state revenues is look at what we actually know,” he said. “Whatever Congress does will have an impact and we will have to deal with them after we know what they are, across the board cuts would be disastrous.”
Rep. Peggy Rotundo, D-Lewiston, is the lead Democrat on the panel. She said it is clear the state will face serious challenges when Congress acts on debt reduction.
“Given all the uncertainty we are living with at this point, I suspect we will be on somewhat of a roller coaster for a while, and I hope it will not be for a long time,” she said. Rotundo said she shares the optimism that Maine’s economy may be once again growing slowly, but that federal action could derail the growth quickly.
“All of this uncertainty in Washington is having an impact on Maine businesses and it also is having an impact on Maine consumers,” she said.
Sen. Dawn Hill, D-York, said she is concerned that revenues are once again in the red for the current budget year and shares the concern that Maine revenues could be severely affected by Congress as it deals with the federal deficit.
“We have to hope that Congress has the courage to move forward and make a decision in a timely manner,” she said. “The sooner it comes; the better it will be for us to deal with it.”
The congressional supercommittee charged with proposing a package to reduce spending by at least $1.2 trillion over the next 10 years must make its recommendations by next Wednesday. Congress than has a month to consider the plan. If it is not adopted, current law requires across-the-board cuts be made to achieve the debt reduction goal.