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The state collected barely half of the revenue it had projected last month as the economic effects of the coronavirus pandemic set in, pointing to the budget challenges the state can expect in the coming months as an economic downturn continues.
The state saw less coming in as sales in hard-hit sectors such as restaurants, lodging and auto sales declined. But most of the revenue plunge was because of the delay in the state’s income tax filing deadline to July 15, according to the state’s revenue report for April, which projected the state’s unemployment rate for the month would be 14.7 percent.
Financial experts have projected Maine could see revenues plunge by $1 billion through the middle of 2021, when the state’s current two-year budget of about $8 billion expires. Gov. Janet Mills’ administration this week projected that the result of substantial revenue losses and the costs of responding to the coronavirus pandemic could add up to a more than $3 billion price tag for the state through mid-2021.
Income tax receipts usually boost state revenues in April, but Mills extended the filing deadline to July 15 in line with the federal government’s current deadline due to the pandemic. That delay in individual and corporate income tax revenue translated to $264 million less than projected in those categories. When balanced out with revenues that came in above projections, the state’s revenue shortfall for April was $248 million.
That drop was expected, and income receipts should rebound in July, Administrative and Financial Services Commissioner Kirsten Figueroa wrote in a May 18 memo to Mills and lawmakers.
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Even accounting for that, Figueroa said, “it’s becoming apparent that the swift and deep COVID-19 related recession will be one for the record books,” pointing to high unemployment nationally and falling sales. And even if state’s reopening leads to a rebound, “recovery is expected to be slow,” she said.
Overall, revenues for April were 47.8 percent below the state’s previous forecasts for the month and off 8 percent so far for the year.
Because sales tax figures for April reflect sales that happened in March, Figueroa wrote that the more serious effects of the pandemic are likely to show up in April data released next month.
The state’s sales and use tax collections were off only $16.2 million — down 13.3 percent from projections. Those figures reflect sales that happened in the first two weeks of March before the state’s economy started to shut down in response to the coronavirus pandemic.
Some categories of sales saw double-digit bumps, such as online shopping and food and building supply stores. Meanwhile, other sectors suffered sizable losses. Lodging and restaurant sales, among the hardest-hit industries of the pandemic, decreased by 45.5 and 33 percent respectively compared to a year ago. Auto sales also dropped 27 percent after a strong winter.
State officials have said they expect to have enough cash to cover this year’s expenses through various channels including the rainy day fund and the general fund balance. Mills has also asked state departments to freeze spending and hiring except in emergencies, which could save up to $250 million.
Even as things appear grim, state Rep. Drew Gattine, D-Westbrook, who co-chairs the Legislature’s budget committee, said it is too early to get a sense of the size of the loss the state will weather.
The report “doesn’t give us a clear picture” because of its focus on March — and the state may not have a better idea of longer-term effects until its revenue and economic forecasting commissions meet this summer.
“In the meantime, all we can do is monitor and watch,” he said.