AUGUSTA — An improved state revenue forecast released Thursday could make things easier on the Legislature’s budget-writing committee as it works to craft the state’s next spending plan.

State tax revenues are exceeding downgraded COVID-19 pandemic projections for January by $89.5 million, said Administration and Financial Services Commissioner Kirsten Figueroa in a press release. For the first seven months of the fiscal year, revenues are up $154 million, or 6.6 percent higher than the same seven-month period last year.

Commissioner of Administrative and Financial Services Kirsten Figueroa Joe Phelan/Kennebec Journal

Last spring, revenue forecasters projected a dire downturn in state revenue as COVID-19 restrictions shuttered many businesses and kept consumers in their homes. But an initial swift response from Congress coupled with relative success at the state level in combating the virus has produced an economy more vibrant than many expected, Figueroa said.

Figueroa cautioned that while the newest numbers look good overall, some sectors of Maine’s economy were still reeling – especially the state’s food and lodging industry. Overall taxable sales were up 12.7 percent in January compared to January 2020, with the biggest surge coming from sales at building supply stores, where sales were up 37.7 percent.

Other areas showing growth over last year included consumer sales, up 12.5 percent, and auto sales, up 16.9 percent. Other retail sales increased by 23.6 percent, much of that attributable to online holiday shopping.

State lawmakers are currently hearing public testimony on Gov. Janet Mills’ proposed $8.4 billion two-year state budget, which needs to be balanced and enacted by June 30 to avoid a state government shutdown. Revenue forecasts play a central role in helping the Legislature determine how much money the state can spend.

Mills detailed many of the highlights of her proposal during a prerecorded speech to the Legislature and the public on Tuesday night.

Figueroa, the top state budget official, called the figures “promising” but said the state would continue to monitor incoming revenues closely in the weeks and months ahead.

“Economists are becoming more optimistic about 2021 economic growth after enactment of the December 2020 stimulus package and ongoing discussions in Washington about the president’s stimulus proposal, with real (Gross Domestic Product) growth forecasts for 2021 jumping from 4 percent to 6 percent,” Figueroa said in a prepared statement.

She also said the state collected 29.4 percent, or nearly $60 million, more than it had budgeted for in corporate and individual income taxes. The category had its strongest performance since 2012.

The strong numbers are good news for town and city officials across the state. A 2020 law change bumped the amount the state shares with local government from 3 percent to 3.75 percent, which has led to an increase of $20.3 million in revenue sharing.

Thursday’s numbers, however, are only a snapshot, and lawmakers will base the state’s final budget package on official forecasts from Consensus Economic Forecasting Commission and the Revenue Forecasting Committee, which are due on April 1 and May 1, respectively. Those reports also would trigger any official adjustment to revenue projections.

Rep. Teresa Pierce, D-Falmouth, the House chair of the Appropriations and Financial Affairs Committee, said lawmakers were “heartened” by the positive news but will continue to monitor the economy closely as they craft the state’s next budget in the weeks ahead.

“By taking the economic impact of the pandemic seriously and exercising fiscal responsibility, we have been able to keep our recovery on track,” Pierce said.

Figueroa’s office also pointed to a recent report by the Urban Institute, a nonprofit and nonpartisan Washington, D.C.-based think tank, showing Maine as one of only 21 states reporting growth in tax revenues between March and December 2020 compared to the same period of 2019. The report shows Maine among three New England states, including Vermont and Rhode Island, as reporting revenue growth. Maine had the ninth largest increase, just behind Vermont.

Sen. Cathy Breen, D-Falmouth, the Senate chair of the committee, said the positive numbers reflect the state government’s response to the pandemic.

“The fact that Maine outperformed revenue projections for the month of January is welcome news as we approach the anniversary of the state’s first reported COVID-19 case,” Breen said. “From the beginning, Maine has taken an aggressive approach in response to the pandemic, prioritizing the health and well-being of Maine people, and relying on the best available science. As a result, both the number of cases and deaths have remained relatively low (compared to the rest of the country), which is good for public health and the economy.”

She said the January revenue report highlights what economists have said throughout this crisis.

“The key to economic recovery is getting the virus under control,” Breen said. “While we’re not out of the woods yet, I’m hopeful that as more Mainers get vaccinated our economy and revenues will continue to rebound.”


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