AUGUSTA – State revenues were about $6 million more than expected in the first quarter of the state’s fiscal year, but the head of the Department of Health and Human Services told lawmakers Monday that her department will have a “significant gap” to fill in the coming months.

DHHS Commissioner Mary Mayhew would not put a number on the size of the shortfall but said she knows the department is spending more than was budgeted.

“I don’t want to leave today and sugarcoat the overall picture,” she told the Legislature’s Appropriations Committee. “We are concerned. There are a number of factors that point to a rather large gap.”

The gap comes from spending on Medicaid.

She promised lawmakers she would return with better information next month.

Mayhew’s presentation came amid mixed economic news. Earlier in the day, the panel heard an update from Maine Revenue Services that said state revenues were higher than expected in the first three months of the fiscal year, which began July 1.

The state expected to bring in $603 million and actual revenues totaled just over $609 million.

Michael Allen, director of economic research, said most of that came from a strong showing for the corporate income tax. “It’s a clear indication corporate profits remain healthy,” he said.

He noted that consumers haven’t fared as well. Incomes are growing, but slowly.

At $609 million, state general fund revenues are up nearly $23 million from the $586 million the state collected in the first quarter of last fiscal year.

Appropriations Committee Senate Chairman Richard Rosen, R-Bucksport, asked Allen if the stronger-than-expected performance so far this year is an indication that revenues are stabilizing.

“You used the word stability,” Allen said. “That’s not a word anybody is comfortable using in this environment.”

In particular, Allen and others continue to worry about food, gasoline and home heating oil prices, and debt problems in Europe and the U.S.

Later on Monday, the state’s Consensus Economic Forecasting Commission met to begin considering Maine and national data on the economy. The group will make a recommendation to the Revenue Forecasting Commission, which will set revenue projections for the coming months and years.

The LePage administration will present lawmakers with a supplemental budget early next year to make sure the state’s $6 billion two-year spending plan stays in balance. At least $25 million in cuts must be made to the second year of the budget. When lawmakers passed the budget in June, they left a $25 million hole and created a task force to recommend cuts.

Glenn Mills, director of economic research for the Department of Labor, said that since January 2007, the state has lost 8,800 manufacturing jobs, 6,100 construction jobs and 5,300 retail jobs.

The state added jobs in education (900) and health care and social services (1,600) over the same period.

MaineToday Media State House Writer Susan Cover can be contacted at 620-7015 or at: [email protected]


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