(TNS) — Mainers are making more, and spending more, generating tax revenues that will help the state’s financial house remain on solid ground, according to the latest forecast on state revenues.
The Revenue Forecasting Committee estimates that Maine will take in $75 million more than anticipated for the two-year state budget that ends in June 2021. Sales and use taxes are likely to exceed budgeted amounts by $40 million, and individual income taxes will generate another $27 million beyond budgeted amounts, according to estimates the committee discussed at a meeting Monday in Augusta.
The state received lower-than-expected income in other areas, including a $12 million shortfall in anticipated money from fines, forfeitures and penalties and a $3.7 million shortfall from state investment income.
The committee’s final forecast is due to Gov. Janet Mills and the Legislature by Dec. 1.
The committee includes some of state government’s top finance officials, including State Economist Amanda Rector and Michael Allen, chair of the committee and the state’s associate commissioner for tax policy.
Allen said the forecast, which also predicts incoming revenues for the next three fiscal years – 2021, 2022 and 2023 – was still conservative in its outlook and at least partially pegged to slowing wage growth in Maine and the U.S.
Some fluctuations in revenue were also attributed to changing federal or state state tax policies, including an expansion of the state’s earned income tax credit and homestead property tax exemption program, and to its property tax fairness program, which is a tax credit paid to some eligible apartment dwellers.
The projections come just a week after the Legislature’s budget-writing Appropriations and Financial Affairs Committee learned the state’s current two-year budget was about $30 million more in the black than anticipated, with most of it attributed to the collection of more state sales tax from internet marketers such as Amazon and eBay.
Beyond the state’s general fund revenues, the forecasting committee also considers other state funds financed with dedicated revenue sources, including the state’s highway fund, the Fund for Healthy Maine and the state’s Medicaid (MaineCare) Fund.
The committee expects a decrease in revenue of about $6.5 million to the MaineCare Fund because of decreases in tax revenue from private non-medical institutions and hospitals. Two rural hospitals in Lincoln and Calais filed for bankrupty earlier this year.
Although state revenues are expected to grow faster than previously forecast, the pace of that growth will slow from 7.3 percent in 2019 to just 2.8 percent in 2020 and 2.1 percent in 2021, a result of slower wage growth.
“We’ve seen pretty strong wage growth throughout 2019,” said Allen. “Starting in fiscal year 2021, that is when you are going to see this wage growth start to decelerate,” He said that, coupled with policy changes, would combine to slow general fund revenue growth in 2021.
Rector said part of the deceleration in wage growth was caused by Maine’s ever-tightening labor market. “Without sort of adding lots of workers, that wage growth is going to slow and peter out over the years,” she said.
Other revenue changes the committee will be keeping an eye on include a new wholesale tobacco tax that goes into effect for vaping products in January as well as changes federal income tax reforms that are having trickle-down effects on state income tax filings.
Allen said the stock market was strong, the economy was good and the state could see revenue growth continue to outpace the forecast. He acknowledged that miscalculations have happened in the past, leading to unexpected drops in revenue.
“But I don’t think we can sit here and say the next eight months of the fiscal year are going to be a complete disaster,” Allen said. “I don’t know what kind of story to tell that would lead to that.”
©2019 the Portland Press Herald (Portland, Maine). Distributed by Tribune Content Agency, LLC.