AUGUSTA — State sales, individual income and corporate income taxes failed to meet projections in August with over all state revenues $19 million below estimates. That puts state revenues after two months of the budget year in the red by $4.8 million.

“The overriding concern really deals with the sales tax,” said Finance Commissioner Sawin Millett. “We started off this year, last spring, with strong growth that seems to have tapered off and now we are looking at sales taxes not meeting estimates.”

He said setting aside the adjustments that are made every August to the sales tax to reconcile the books from the previous budget year; the sales tax is not meeting projections. He said if that continues it will pose a significant budget issue in the next session.

“You have to worry as long as that $4 a gallon gas price stays people are going start making decisions on what they can spend,” Millett said. He said some people are already filling their oil tanks for the winter heating season and paying close to $4 a gallon for heating oil.

“The revenue forecasting committee may well have to re-project revenues when they meet in November,” he said.

The sales tax was below estimates in July by a couple of million dollars, but that grew to $6.7 million after the first two months of the budget year. Sales taxes paid to the state in August reflect collections merchants made in July.

“Given the warm and dry weather in July the tourism related areas of restaurant and lodging sales were disappointing,” Millett wrote in a memo to Gov. Paul LePage and legislative leaders. For example, he said, restaurant sales were only one percent above a year ago and lodging was up 2.4 percent.

“The state of Maine figures seem to be in line with some of the alarm bells that have been sounding nationally,” said Sen. Richard Rosen, R-Bucksport, the co-chairman of the Appropriations Committee, “I think we are seeing an overall slowing in the pace of the recovery.”

Rosen said having all three major tax sources not meeting estimates has to be a concern and if revenues continue to lag, it could mean revenues have to be re-projected down in the fall.

“I am not as concerned about the corporate income tax because that can vary widely,” he said. “We have seen that swing from month to month before and it is hard to project.”

Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the panel and a former co-chair of the committee, said the sales tax is a good measure of how the average Mainer is doing. If they are optimistic, they spend more on goods and services, but if they are worried they tend not to spend any extra money, but save it for future expenses.

“We were hoping that July was a blip,” she said. “With this second month coming in below there has to be a concern here that there may be a trend.”

Rotundo said that high gasoline prices have had an impact on spending and she expects that will continue as the winter heating season approaches. She said there are also a lot of Mainers who are out of work or are under employed and until the state has significant growth in employment, revenues are likely to be slow to improve.

“I have always said we need to look at the employment numbers and not the unemployment numbers,” Rosen said. “We will not really start to recover until more people are working.”

The individual income tax was down $10.7 million, but that was expected because of a timing issue with individual income tax receipts above estimates in July by $11.4 million. Except for the timing issue, individual income taxes were close to estimates in August.

The failure of the major tax lines to meet estimates was offset somewhat by smaller revenue sources. For example the tax on cigarettes was above estimates by $2 million.


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