The state ended the fiscal year in the black thanks to higher than budgeted income tax receipts, but taxes on sales continue to lag behind.

Individual income taxes are forecast to come in over budget by more than $80 million and corporate income tax also is coming in around $10 million higher than expected. Numbers will be finalized later this month.

The state already has spent $27 million of that surplus to balance the budget that closed on June 30 – a revenue taking that raised eyebrows last month because the state is facing such uncertain economic times in the year ahead. Any money left over after the close of the fiscal year goes into various budget stabilization or rainy day reserves.

Mike Allen, the chief economist with the Maine Revenue Service, said an increase in capital gains – including profit made from real estate – and stock dividends pushed the income tax line over the top.

Sales taxes, however, continue to be disappointing, pointing to sluggishness in the Maine economy. Sales taxes for the year are expected to be down from budget by $15 million.

“We’re not going to have a very good month on sales tax,” Allen told a joint meeting of revenue forecasters at the Statehouse last week, and that follows a pattern that has dogged the state since the start of the calendar year.

Allen said auto sales were down close to 12 percent, followed by a 7 percent lag in general merchandise. Meals and lodging sales were up by 2.5 percent.

Allen said the drop in sales tax practically mirrored the rise in home heating oil and gas prices. People not only were worried about paying their fuel bills, Allen said, but it also affected the kind of cars they were buying.

“People are switching out of SUVs,” he said, and “that’s where we were collecting a lot of the money” in sales tax.

Grant Pennoyer, head of the state’s non-partisan Office of Fiscal and Program Review, said he was concerned the Revenue Forecasting Committee, of which he is a part, met in early June to spend $27 million in income tax revenue when economists knew the surplus could be “wiped out” by the base closures. The Pentagon has recommended shutting down Portsmouth Naval Shipyard and an accounting center in Limestone, and scaling back operations at the Naval Air Station in Brunswick. A final decision will be made by the end of August.

“I was troubled as why we were looking at just one year,” Pennoyer said, “when we knew we had these uncertainties.” He also said that while the revenue was over budget, it was within 1 percent of the forecast and therefore didn’t warrant an emergency meeting to capture the revenue in the last fiscal year.

“By most people’s standards that was a relatively accurate forecast,” he said.

Many members of the Revenue Forecasting Committee ultimately report to Gov. John Baldacci, leading some to suggest that taking the $27 million was political.

“I’m not sure I would entirely agree it was politicized,” said Ryan Low, the state’s budget officer, who also sits on the committee. He said there was bipartisan support for taking the $27 million to help pay the bills in 2005. If the revenue forecast had dropped by as much as it went up, he said, “we probably would have done the same thing,” and met to deal with the problem.


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.