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STATE HOUSE

State revenue dips in July, but looks up for August

Lawmakers briefed on latest reports

By Rebekah Metzler rmetzler@mainetoday.com
MaineToday Media State House Writer

AUGUSTA -- The state's July revenues came in just below estimates but August returns are looking up, tax officials told Appropriations Committee lawmakers Monday.

General Fund revenues for July, first available a couple of weeks ago, were under budget by $1.2 million, said Mike Allen of Maine Revenue Services. But Allen said he expected August revenues would be up by about $10 million over projections.

"We've seen consumer spending still growing, but it's more in this 2.5 percent to 3 percent range, as it is nationally," he said. "I think you are going to see for ... the remainder of this calendar year that we're going to be ... fairly close to budget, almost on all lines."

Revenue from the sales and use taxes was over budget for the fourth straight month -- up $1.7 million, or about 2 percent, in July, Allen said, adding that good summer weather was a boost.

"You can see that lodging sales were up close to 6 percent over last year, but restaurant sales are still struggling, only up less than 1 percent over last year," he said.

State Treasurer David Lemoine also briefed lawmakers on the historically low interest rates secured for the bond anticipation notes he most recently issued.

Bond anticipation notes are short-term loans issued by the state in preparation for taking out the full 10-year bonds approved by voters, Lemoine said.

The nontaxable short-term bond anticipation note of $45 million is at a 0.27 percent interest rate and the taxable bond anticipation note for $24.5 million was secured for 0.49 percent.

"It is shockingly low," Lemoine said. "As we've entered a phase where there is uncertainty in the market about what will happen, people are chasing security. That has driven U.S. Treasury prices way down and spilled over to the municipal market, where, especially for the short-term notes, it has been the view that these are very safe places to put money. So there's been a lot of demand to put money in the municipal market and that has driven down these prices down to truly historic lows."

Lemoine said in average economic times, interest rates for bonds would be 4-5 percent.

"That sounds phenomenal," Sen. Bill Diamond, D-Windham, the Senate committee chairman, said of the low rates.

Lawmakers also heard from Brenda Harvey, commissioner of Maine's Department of Health and Human Services, who said the department is moving forward with plans to switch Medicaid billing computer systems Wednesday.

The new system will replace a five-year-old one that did fully meet federal requirements.

She said testing in anticipation of the switch has been going well, but nonetheless the department is preparing for a surge in phone calls from providers in the days after the transition.

"There is a tremendous amount of anxiety on the part of providers -- and I think we expected that," she said.

Members of the Appropriations Committee will meet again in mid-September.

Rebekah Metzler -- 620-7016

rmetzler@mainetoday.com