AUGUSTA, Maine — With only a few weeks to go in the budget year, state revenues are up $24.9 million over revised estimates made in April and Finance Commissioner Sawin Millett says that means the state will likely end the year in the black.
“You have to feel pretty good that we will end the year with a surplus,” he said. “But what that means for future months remains to be seen.”
The uncertainty is because a significant part of the anticipated surplus is one-time revenues, including money from a settlement of a national lawsuit, and other revenues may not continue to exceed expectations. For example, in May, estate taxes were bolstered by a large payment and were $5.3 million over projections for the month.
While it is hard to estimate corporate income tax revenue because much of it comes from corporations based out of state, in May it was projected to bring in $1.3 million but brought in $6.9 million.
“The corporate tax continues to do better even with the new forecast that was made,” Millett said. “It continues to do better than we expect.”
But, he said, the two largest sources of state revenue, the sales tax and the individual income tax, show signs of weakness. The sales tax is projected to bring in $973.2 million this year, but is currently only $222,171 above estimates.
“But if you look year over year, we are up $45 million over what was collected a year ago at this time so it is showing some growth,” Millett said.
He said the individual income tax is the largest source of state revenue. By the end of the month, it is projected to bring in $1.445 billion for the year but it is below estimates by $4.6 million going into this month.
“I think the message there is that we have to closely watch the individual income tax line,” Millett said. “We have to see what it does through the summer months and whether we are seeing income growth.”
He said with the individual income tax such a large source, it will have an effect on the size of the revenue surplus. He said he is comfortable that the revenue surplus will be at least the current $24.9 million.
“We also have the unspent balances in accounts that will take a while to compile,” Millett said. He estimated the unspent balances would be between $5 million and $10 million.
Sen. Richard Rosen, R-Bucksport, the co-chairman of the Appropriations Committee, said while it is good news there will be a surplus he continues to worry about the implications for the future with the softness of the individual income tax.
“We are really looking to see some strength in wages and the earned income that is reflected in the individual income tax,” he said. “If we are seeing only tepid improvement there than that is a concern. We have to see some growth in wages from people working to see a real increase in revenues.”
Rosen said he was not surprised at the corporate income tax continuing to exceed estimates just made in April. He said national corporations continue to show significant profits and that is reflected in the tax they pay.
Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the panel, agrees with the importance of the individual income tax because it drives other sources of revenue for the state.
“If people are not working and earning wages, they are not buying as much in stores and paying sales taxes,” she said. “The sales tax line has always been a good indicator of how families in Maine are doing.”
Rotundo said the committee will be closely watching all of the state’s revenue sources, as it continues to struggle to recover from the recession.
Millett said once the surplus is finally computed, that does not mean extra money for the state to spend. He said current budget law allocates where a surplus will go. The governor’s contingency account gets restored and the reserve fund at the Finance Authority of Maine gets $1 million.
The budget law then allocates the next $15 million for a one-time cost of living adjustment for state retirees, and then the next $25 million will go to hospitals for payments they are owed. If there is anything remaining, the money is then allocated to six programs.
“There may not be anything left for those,” Millett said.
Make no mistake, Peggy Rotundo and the other Dems on the appropriations committee are already finagling to find a way to spend any anticipated State surplus on social programs. Rather than prudently pay down some of the State’s debt, politicians in Augusta have had a severe problem with money burning a hole in their pockets for many years.
Thats your enterpetation from republican eyes. Shake your head and read it again.
Agreed Bee. Pay down or off the current State Bond’s and debt’s. The interest saving’s and Bond service fee’s alone are gonna provide another means of saving’s. Pay off as much as possible of the hospital’s bill’s but get the remainder of these fund’s invested in business’s that are going to, by actual demonstration and Letter’s of Commitment, bring both manufacturing and job’s to Maine. Then when Maine has a ‘spread out’ business base that provides both job’s, and business revenue’s, can the State start really going after paying down these exisitng Bond’s that are crippling the State with their outrageous interest rate’s. As we all know, when times ar tight, Cash is King. And paying for any project, cash upfront or in escrow, is always the better way to go since there’s no mistaking the intent of the cash or what it’s gonna be used for. Even LePage and Company can ‘t argue that. And if they do then may someone please refer Paulie fora serious session at Riverview’cause that’s one light that even a blind man can see if they have any common sense.
That’s a good plan if it works that way. Unlike the Pinetree Zones where local manufacturing used it to finance moving products out of State and offshore.
Very true Sir. Put a provision in these R&D and Business Development funding program’s that REQUIRE the business to meet certain criteria, among them the actual manufacturing and hiring of the local workforce, as opposed to hiring from out of the country (ala the H-1 & H-2 Visa Program’s). You can bet that the DECD folk’s are thinking about this right now, Paulie or no Paulie, with the Bombardier option now running around right now.
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And this isn’t a headline why?? God forbid the BDN post any good news coming from the republican gov, house, or senate. If Baldi was still in power, this would be breaking news….
No way is the BDN going to give LePage a pat on the back.
A surplus???? Give it to the occupiers they
deserve it.
Don’t get to comfortable about this so call surplus ………………….. probably next week we will read an article about how many $Millions we have in budget shortfall.
Our corporate income tax for the whole state, for the whole year was only estimate at $1.3 million??? I’d say we must be more business friendly then we let on :)
Where’s all those jobs the Repubs said would come with the increase of business income?
Revenues are up. Maine is currently at 7.4% lower than the national average. Both indicators that this state is improving, not declining. If you think that a governor can turn around a state economy in two to three years after three decades of being run into the ground, you live in a fantasy world.
Why not? Isn’t that exactly what Mitt, The Trust Fund Baby, Romney is saying about Barack? We got double standards here or are you saying Obama is doing a good job? Can’t have it both ways.
Romney is all about double standard’s with his calling for the elimination of the public education system, the elimination of all 1st Responder’s that we all depend on (Gee, who you gonna call at 3 AM and the house is on fire or your house is getting broken into, the local GOP Committee ?) and calling, to the point of literally jumping into the same bed, for the extension of the Bush tax cut’s that put us ALL into the current mess we’re in now. And some of you want to go skinny dipping in this shark tank ? Please, before you do please leave your name and the next of kin written on the clothes you’re about to lose to the shark’s that are waiting for their dinner in the tank. As for the rest of us, well, it’s nice to see that Darwin was right. Life that’s not smart enough to know danger will eventually go extinct from either stupidity or lack of ability to reproduce. Given Romney’s current position on Planned Parenthood and the lack of practicality that he’s showing familiy’s, he’s well on his way toward fulfilling that particular GOP platform goal. Reproduction is wasted on those that are determined to commit suicide in any way shape or form. And as we are all seeing, Romney’s got a campaign staff full of imaginative ‘waster’s’.
I like the popular Repub lie used by Summers about Obama spending being out of control. Any fool knows that spending begins in the House. Guess who controls the House of Representatives! Maybe they changed the rules without telling anyone, but I don’t think they relinquished power to the President. Another Repub lie. They got nothing so they have to make things up. They can’t possibly make up enough lies to make The Trust Fund Baby look good!
There is no surplus as long as there is debt.