Governor LePage Focused on Balancing State Budget with Lower than Expected Revenues

RFC Committee predicts $69M shortfall for upcoming two-year budget

AUGUSTA – The State of Maine’s Revenue Forecasting Committee (RFC) met Friday to discuss its April report, which will be released formally next week. The report forecast decreased revenues including a sharp decline in sales and corporate income taxes totaling more than $100 million in fiscal years 2014 and 2015.

“When sales and corporate taxes are down by this much it is a clear sign that Maine businesses are struggling,” Governor Paul R. LePage said. “Uncertainty in the national economy is compounding a growing lack of confidence among business owners, inhibiting their ability to expand and hire people.”

Based on the revised forecast, state expenditures are expected to exceed anticipated income and other available funds during the upcoming two years by approximately $60 million. While sales and corporate taxes fell short by $102 million, estate and real estate taxes are expected to provide modest increases over prior forecast levels. Most notably, individual income taxes are predicted to increase by nearly $29 million over the biennium and more than $44 million in FY2016/FY2017.

“Reducing the tax burden on Mainers was a good, meaningful policy decision in 2011 and we are seeing an uptick in income taxes as a result. Policies that reduce state spending, remove red tape, and allow businesses to invest and create jobs are what we need to move Maine’s economy forward,” Governor LePage said.

The Revenue Forecasting Committee will formally submit its report next week, however, Governor Paul R. LePage has already taken swift action to address the anticipated shortfall, including meeting with all Cabinet members to discuss the issue. A change package proposal that reflects the RFC’s forecast is being prepared, and Governor LePage has reached out to all commissioners for input on spending reductions to include in the plan.

“While disappointing, the RFC’s forecast for the next two biennia is not unexpected,” said H. Sawin Millett, Jr., Commissioner of Department of Administrative and Financial Services. “DAFS has already begun work on a change package for Governor LePage’s biennial budget proposal and will incorporate the data from the forecast into that package. The state constitution requires a balanced budget, and it is essential that our ongoing expenses match our incoming revenues.”

“During that time, we will also communicate with the members of the Legislature’s Appropriations Committee about the impact of the forecast on the governor’s budget proposal. As the RFC forecast indicates, these diminished revenues are not a temporary problem. We must identify long-term savings for the Legislature to implement,” Commissioner Millett continued.

The RFC consists of the State Budget Officer, the Associate Commissioner for Tax Policy, the State Economist, and an economist on the faculty of the University of Maine System selected by the chancellor, the Director of the Office of Fiscal and Program Review and another member of the Legislature's nonpartisan staff familiar with revenue estimating issues appointed by the Legislative Council. The RFC is required by statute to meet four times a year.

The revenue forecast for the next four years is the result of a combination of issues. “The economy has not grown as fast as anticipated. Maine families are dealing with an increase in the federal payroll tax, uncertainty about the debt ceiling and high energy costs,” said Dr. Michael Allen, Associate Commissioner for Tax Policy. “This uncertainty on the federal level is causing businesses and consumers alike to be more cautious about how they spend their money."