AUGUSTA — Maine finance officials gave some dreary fiscal news to lawmakers Friday, reporting that state revenues were sagging at the end of the first quarter. But they also pointed to some positive trends that could brighten the picture.

Finance Commissioner Sawin Millett told the Appropriations Committee that state general fund revenues were $26.9 million less than budgeted as the first quarter ended in September. Sales and use taxes accounted for a big chunk of that shortfall, coming in $9.5 million short of what officials were expecting for the July-September period. In addition, the important personal and corporate income tax lines were below projections, Millett said.

“Much of this is cause for concern, but not cause for immediate panic,” Millett told the committee.

While sales and use taxes are 4.7 percent less than projected, Millett said they’re “not terribly out of line” and some positive trends are appearing that could improve the balance sheet in the $3 billion annual state budget.

For example, sales tax revenues for restaurants, hotels and motels, auto sales and other retail areas increased between August 2011 and this past August, reflecting consumer optimism, said Millett. The only area where sales taxes slipped was building supplies.

But looking ahead, the finance chief said there are concerns about how the cost of fuel may impact Maine’s economy.

“It’s been nearly a month now that we’ve all been experiencing $4 a gallon prices at the pump, fuel oil costs are up dramatically, with people tanking up for the winter,” Millett said. “There’s going to be less impulse buying and spending as we look at the next few weeks and months unless energy costs stabilize dramatically.”

And while a preliminary state unemployment rate of 7.6 percent for September reflected a 0.1 percentage point drop from the previous month, it’s nothing to get excited about, said the Maine Center for Economic Policy, an independent research and advocacy group.

“Once again job growth in Maine is anemic at best. Maine continues to rank near the bottom of states in terms of job growth over the last year,” the group said in a statement.

The figures and trends are being watched closely as Millett and his department compose Republican Gov. Paul LePage’s next budget.

A Democratic member of the committee, Rep. Peggy Rotundo of Lewiston, said the nearly $27 million quarterly shortfall “is a cause for concern. That’s a lot of money we would need to make up.

“I’ve been watching the sales tax line very carefully because I feel that the sales tax line is a really good indication of how working families in Maine are doing. And it’s soft, and that concerns me. It shows that we haven’t experienced a recovery here,” Rotundo said after Millett’s presentation.

Also of concern to Democrats on the committee is the so-called structural budget gap of $756 million, or money the state lacks to meet all of the obligations it’s made. Of the total, $400 million stems from tax cuts approved by the Legislature during the last two years, they say.

“The Republicans promised these tax cuts would foster economic growth and pay for themselves, but now we see that promise is not bearing out,” said Rep. David Webster, D-Freeport.

Millett said it’s too soon to assess the full impact of the tax cuts, which are called the largest ever in Maine.

“No one will know the full impact of the tax law changes for many years to come,” Millett said.

 

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