Maine news, sports, weather | Kennebec Journal, Augusta, Maine

BREATHING ROOM FOR BUDGET

Revenues on the rise

$365 million in new revenue available for next 2-year cycle

By Susan M. Cover scover@mainetoday.com
State House Bureau

AUGUSTA -- State revenues are projected to be up an additional $365 million for the two-year cycle that starts in July, giving budget writers a little breathing room as they prepare the next state spending plan.

Gov. John Baldacci in the Hall of Flags October 11, 2007.

Staff photo by Jim Evans

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The state's Revenue Forecasting Committee met Tuesday to discuss its December report, which will be released formally next week.

With a strong showing in corporate and individual income tax lines, the group reprojected state revenues for the current fiscal year by adding $111 million. And for the next two-year cycle, revenues are expected to be about $365 million higher than earlier forecasts predicted.

Gov. John Baldacci said these projections show Maine's economic outlook is brightening, and compared it to the steady turn of a "big ocean liner." Most heartening, he added, are the gains made by corporations, particularly those that do business beyond the state's borders.

State Economist Michael LeVert, a member of the revenue committee, said corporations are making more money because they laid off workers but have not replaced them. Those who are working are making more money as they get more hours, win back pay cuts and see fewer furlough days, he said.

But the unemployed continue to struggle. "There's a little bit of disconnect between the revenue forecast and the employment forecast," LeVert said.

The Maine Department of Labor reported Tuesday that the unemployment rate was 7.4 percent in October, down from 7.7 percent in September and 8.1 percent a year ago. The number of unemployed workers in Maine stands at 51,100.

Labor Commissioner Laura Fortman said in a statement the unemployment rate dropped because of modest job growth, but also because people are leaving the work force to get additional schooling or else are too discouraged and stop looking for work.

"As the pace of recovery picks up in the months ahead, the unemployment rate may rise as thousands re-enter the labor force," she said.

Gov.-elect Paul LePage has a team working on the new state budget, which is due to be delivered to the Legislature in February. Last week, the projected deficit was $1.2 billion, a number that can now be reduced to about $840 million.

Depending on requests for supplemental funding through the rest of the current fiscal year, there could be several more million available for the new budget.

Sawin Millett, who leads the LePage budget team, said the additional revenue will make it easier to close the gap but that other cuts will still be necessary.

"It will make it a bit easier to get it into balance," he said. "We know we have a sizable gap to fill. It's going to take serious restructuring."

The 10-member team is currently getting briefings from state agencies about their budget requests and is looking closely at specific subject areas such as Medicaid, he said.

Sen. Bill Diamond, D-Windham, a member of the current Legislature's Appropriations Committee, cautioned against too much optimism because of the additional revenue.

"People should not get overly excited about this and spend it," he said.

Diamond said there's still a lot of uncertainly with the economy and that there are major bills to be paid, such as the state's unfunded pension liability.

"That's an example to remind ourselves these numbers change almost overnight," he said.

Gov. Baldacci also that the improved revenue forecast is the result of tough decisions made in recent years, such as restructuring and consolidation of schools and government services, and not raising taxes despite deficits.

"Those actions laid the foundation for recovery," he said.

Susan Cover -- 620-7015

scover@mainetoday.com