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Additional state budget surplus sparks debate about how to use it

The Maine State House is seen Monday, Nov. 12, 2018, in Augusta, Maine.
Robert F. Bukaty
The Maine State House is seen Monday, Nov. 12, 2018, in Augusta, Maine.

Maine continues to take in higher-than-expected tax revenues, setting the stage for potential partisan fights in Augusta over whether to spend the money or return some of it taxpayers.

According to preliminary estimates from Maine’s Revenue Forecasting Committee, an additional $223 million are expected to flow into the state’s tax coffers by the end of the fiscal year on June 30. That estimate could change next week based on late-arriving revenues.

But Michael Allen, associate commission of tax policy for the state, said Friday that revenues were up more than $100 million this March when compared to the same period last year. Allen said the biggest contributors to that increase were individual income taxes, corporate income taxes and sales taxes.

"On sales tax, it's been running hotter than we expected,” Allen said. “We really thought during the holidays and certainly after the holiday season that sales tax would slow down and, in fact, turn negative on a year-to-year basis. That has not been the case."

Lawmakers use those revenue projections to create the state's budget. While Democrats that control the House and Senate already passed a roughly $10 billion budget for the two-year period that begins on July 1, the Legislature’s budget-writing committee will likely recommend additional changes to this year’s and the next biennial budget based on those projections.

It didn’t take long for the various sides to begin declaring their hopes for the additional tax revenue.

“People are struggling to heat their homes, pay their electric bills, buy groceries, fill their gas tanks, and pay rising prices on everyday items,” the Republican caucuses in the House and Senate said in a joint statement on Friday afternoon. “The current revenue projections will allow us to lower taxes so that Maine’s people can keep more of their hard-earned money. Republicans are calling on Democrats to commit to working with us to end the practice of over-collecting and over-taxing our citizens and then sending part of it back to some. This practice of picking winners and losers must end.”

Democratic Gov. Janet Mills, meanwhile, talked about tapping the additional revenue as a “down payment” on a new business incentives proposal her administration announced this week. Mills wants to replace the roughly 20-year-old Pine Tree Development Zone Program with a new program that invests in worker training programs to help employers find qualified candidates and offers tax credits for capital investments.

“Maine continues to stand on strong fiscal footing thanks in part to our responsible approach to budgeting and our strategic investments that have supported Maine people, strengthened our economy, and led to record high savings,” Mills said in a statement. “Looking forward, we will continue to manage state finances prudently, live within our means, and bolster immediate issues, like housing, food insecurity, emergency medical services and other priorities. I look forward to working with the Legislature in the coming weeks on these issues.”

The longer-range forecast is not quite as sunny, based on the current projections. The Revenue Forecasting Committee’s is projecting an additional $71 million in tax revenues for fiscal years 2024 and 2025.