The state’s bad financial situation is expected to get worse – with December revenues coming in $11.7 million below an already pared-down forecast – and the only question now is how big will the budget hole get.
Legislators currently are grappling with a $95 million shortage – based on a revenue reforecast done in November – and they are being asked to make what some see as severe cuts in health and human services. So Tuesday’s news that revenues are worse than expected hit hard.
The $11.7 million shortage in December is in all tax lines and does not yet reflect the full impact of a bad Christmas season since sales tax reporting lags a month behind. Sales tax revenues reported Tuesday, reflecting November sales, were $1.6 million below budget despite initial signs that holiday shopping in November was robust.
“The (early) reports on December aren’t good,” said Mike Allen of the Maine Revenue Service. “Sales taxes are looking weak.”
Individual income tax collections were below budget in December by $2.4 million; corporate income tax was under by $1.3 million; and the cigarette tax was down $1.2 million. Allen said the next few weeks will be the most telling in terms of how much more the state needs to lower it revenue projections, and the signs are not good.
Estimated individual income tax payments, due Jan. 15, are “well behind our target for the month,” Allen said. He declined to say how much.
And that, coupled with a weak sales tax forecast, spells trouble, since there are no offsetting increases in other tax lines. The Revenue Forecasting Committee will meet in late February to make its adjustments.
Gov. John Baldacci, in his weekly radio address Saturday, gave the first official warning that more cuts were yet to come.
“We must prepare for the possibility that more bad news about the economy is coming,” Baldacci said.
He used his radio address to push his consolidation proposals, including the law passed last year that is designed to cut down the 290 districts in the state to 80. That law currently is up for review by the Legislature.
This session, the governor is pushing a merger of county jails into the state prison system and wants to combine four natural resource departments into two.
“Our revenues have declined, we have a growing list of needs and we don’t want to raise taxes. And we have a government that in many ways needs to be updated for the 21st Century.
That’s our situation,” Baldacci said.
“We can’t shy away from changes that will put us on more sound financial footing and fix the structural shortcomings in government that needlessly draw resources away from where they can do the most good,” the governor said.
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