State tax collections were off by nearly 50 percent last month as income tax payments were delayed and the economic impacts of the COVID-19 pandemic began to take hold in Maine, the latest report from the state’s finance commissioner shows.

Much of that decline, about $240 million, is the result of a delayed deadline for income tax filings – from April 15 to July 15. That revenue is based on income earned in 2019, before the pandemic, so it is still expected to flow into state coffers and will be used to help balance the state’s current budget.

But declines in other tax revenues in the April report are the first tangible signs of the economic decline and looming financial challenge facing state government. The April revenue report reflects March economic activity, so it is capturing only about two weeks of the stay-at-home order that quieted much of the state’s economy.

“With April data beginning to trickle in it’s becoming apparent that the swift and deep COVID-19 related recession will be one for the record books,” state finance commissioner Kirsten Figueroa wrote in her monthly memo to Mills and lawmakers on the Legislature’s Taxation and Appropriations committees.

Figueroa said the drop in income tax revenue was expected as many taxpayers delayed filing returns. In an email, Figueroa said the report shows both actual as well as anticipated receipts, or accruals, because of the filing deadline postponement. Figueroa said using accruals is important, both for keeping incoming revenue within the current fiscal year and sharing revenue with cities and towns.

“Additionally, not including the accrual would have resulted in a sharp reduction in revenue sharing to municipalities, which would then have created shortfalls within their budgets and sent them scrambling to adjust vital services,” Figueroa said. “However, because we included the accruals, State government transferred approximately $15 million to municipalities via revenue sharing based on April revenues, whereas it would have been just over $7 million had we not.”

The full economic impact of shuttering businesses and other activities to prevent the spread of the virus will be more pronounced in the next revenue report due in mid June, when April’s economic activity will be on full display,  Figueroa warned.

But the early effects of the pandemic are clear in the report released Wednesday.

Overall sales tax receipts for March fell $16 million short of projections, while taxes on tobacco products missed projections by $1.7 million, the report shows.

And already showing a decline were sales at businesses that anchor Maine’s tourism economy, which is expected to be significantly truncated in 2020.

March lodging sales were down 45 percent compared to March 2019 and sales of restaurant meals and prepared foods were down by 33 percent.

Lawmakers on the budget-writing Appropriations and Financial Affairs Committee reacted calmly to the numbers Tuesday, saying not much of the data was unexpected.

Other details were also predictable, including an increase in sales tax receipts from online purchases and upticks in sales taxes on non-food items sold at grocery stores – such as toilet paper and cleaning supplies.

“It certainly aligns with the way I’m living my life these days,” said Rep. Drew Gattine, D-Westbrook, House chairman of the appropriations committee.

Both Gattine and Sen. Cathy Breen, D-Falmouth, Senate chair of the committee, warned against reading too much into Tuesday’s numbers as they reflect only the very beginning of the impact COVID-19 is having on the state’s economy, which had been running on all cylinders.

How the revenue declines will ultimately affect the state’s current $8 billion, two-year budget won’t be apparent until more data comes out. Still, they expect revenue shortfalls going into the 2021 budget cycle next January to be significant.

“I still expect the drop in revenue is going to be very, very bad,” Gattine said. He said policy makers would get a clearer picture later this summer after the receipts for the full months of April, May and June are in the books.

That dire picture was more likely to play out in 2021, when tax revenue from personal and corporate income earned in 2020 is likely to drop dramatically.

Breen also said expanding unemployment benefits to the self employed, the $600 increase in weekly jobless benefits and the rapid federal aid to states and businesses would all factor into how the state fares long term.

“There is money coming into consumers’ hands from the federal government that really hasn’t gone through the system yet,” Breen said. “It’s both purchasing power and it’s taxable income.”

Sen. Jim Hamper, R-Oxford, ranking Senate Republican on the committee, said he wasn’t surprised by the April report. He noted it seems to reflect consumer activity he’s anecdotally observed since COVID-19  restrictions were put in place.

Hamper seemed to agree that state budget writers need to proceed carefully as they move forward, but also that there are variable that are still unknown, including what additional financial help may come from the federal government, and how much of the summer tourism economy might be salvaged this year.

“I’m not at the point where I’m going to be blasting the administration or anything, to me there’s no value in that,” Hamper said. “To me this is the situation and here’s the money.”

Both he and Gattine also noted the state’s budget stabilization fund, the so-called “rainy day” fund with about $239 million, had yet to be tapped. The current state budget is also set to send another $17 million to that fund at the end of the fiscal year on June 30.

“And we are picking up somewhere in the neighborhood of $360,000 a month in interest on that,” Hamper said.

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