AUGUSTA — State revenues are up by about $6 million in the first quarter of the state fiscal year, but the head of the state Department of Health and Human Services warned lawmakers Monday that she’ll have a “significant gap” to fill in the coming months.

DHHS Commissioner Mary Mayhew would not put a number on the size of the gap — despite attempts by lawmakers to pin it down — 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 members of the 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, although Mayhew and her staff are still crunching numbers to get a more precise answer. She promised lawmakers she would come back with better information next month.

Mayhew’s presentation to the committee came on a day of good and bad economic news at the State House. Earlier in the day, the committee heard an update from Maine Revenue Services that showed state revenues are higher than expected in the first three months of the state fiscal year that began July 1.

Michael Allen, director of economic research, said most of that is due to a strong showing in the corporate income tax.

“It’s a clear indication corporate profits remain healthy,” he said.

However, he noted that consumers haven’t fared as well. Incomes are growing, but they are growing slowly. Allen said businesses have money to spend, but they are nervous.

“What people are concerned about is the amount of uncertainty is so huge businesses have moved to the sidelines and are waiting for that to go away,” he said.

Compared to the first quarter last fiscal year, state General Fund revenues are up nearly $23 million. Appropriations Committee Chairman Sen. Richard Rosen, R-Bucksport, asked Allen if the stronger than expected performance so far this year is an indication that revenues are stabilizing.

Allen worked to lower expectations.

“You used the word stability,” he 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 in the day, members of the 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 then 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. That will be in addition to at least $25 million in cuts that must be made to the second year of the two-year budget. When lawmakers passed the budget earlier this year, they left a $25 million hole and created a streamlining task force to come up with recommended cuts.

Glenn Mills, director of economic research at the Department of Labor, showed the economic forecasters how the recession affected jobs in each sector. Since January of 2007, the state has lost 8,800 manufacturing jobs, 6,100 construction jobs and 5,300 retail jobs, he said.

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

In the last 14 months, the state’s unemployment rate has been stuck between 7.5 and 7.8 percent.

“It’s really kind of stagnation,” he said. “For every positive indicator, there’s a negative indicator.”

Susan Cover — 620-7015

[email protected]


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