For once the state’s revenue tally contained some good news. After many quarters of downward adjustments based on lower-than-projected tax collections, the state actually took in more than it expected, and the $51 million revenue boost along with $26.7 million more in unanticipated federal Medicaid funding, leave lawmakers a little room to maneuver for a change.

The news is tempered by the fact that the amount of increased revenue is small when compared to what was a $380 million shortfall. And not all the news in the report was good. While taxes on corporate earnings boosted the state’s coffers, sales tax revenue projections are actually coming in below expectations.

Despite signs that there is an early-stage recovery under way, the indicator of real growth, consumer confidence in the economy has not rebounded, and won’t as long as thousands of people are out of work and people who have jobs are afraid of losing them.

An international incident or even a spike in oil prices could make revenue fall back below projections, adding to the gap instead of subtracting from it.

Given the fragile nature of the recovery, lawmakers are engaged in a debate on what to do with the additional money. Some Republicans are understandably urging caution, and favor going forward with the program of cuts outlined by the governor in his supplemental budget package earlier this year. Gov. Baldacci’s office is revising its budget proposal, and restoring some of the cuts that it had proposed earlier.

Even in this volatile economy, that is the right approach. Some of the proposed cuts, particularly in social- service spending, could have profound negative effects on vulnerable people such as elderly and disabled nursing home patients. These are cuts that should not be made unless they are absolutely necessary. The option to cut later will not go away if the economy takes another turn for the worse.

And cutting government spending means Maine people will lose their jobs, which will contribute to slack consumer demand that, among other things, keeps sales tax receipts below projections. Restoring some cuts won’t stimulate growth, but it won’t make things any worse than they have to be, either.

 

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