Maine’s top financial officials say state revenues are doing better than expected overall, but warn that the loss of revenue is still significant and will pose some serious policy questions for the Governor and the legislature.
The legislature’s Appropriations Committee, which met virtually, heard from Finance Commissioner Kirsten Figueroa, who says that while some national models have projected Maine’s revenue losses at possibly over $1 billion, the state’s own estimate is much lower.
“For FY 21, right now, according to our scenario, it is closer to $525 million.”
Figeuroa says Maine will end the current budget year in June with some extra cash to help pay the bills in the new year, and that the state Rainy Day Fund can cover more than half of the shortfall in the coming year if necessary.
Mike Allen of Maine Revenue Services says that while jobs have been lost, the expansion of unemployment benefits paid for by the federal government has bolstered revenues somewhat.
“The unemployment benefits have been enhanced, the extra $600,” says Allen. “Those are taxable. We believe we are having withholding taken out of those benefits.”
And Allen says most workers that lost their jobs were in relatively low-paying positions, while many in better paying jobs, including four out of five state workers, have been able to work from home. Allen says in some cases lost tax revenue in one area has been offset by increases in revenue elsewhere.
“Stores that sell a wide variety of goods are doing very well in this pandemic. They are selling cleaning supplies; they are selling food.”
Allen says specialty retailers are not doing well. Restaurant sales taxes are also way down, while grocery sales are up. Figueroa says the state got some relief from the $1.25 billion it has already received from the federal government for COVID-19 related costs, even though it has not been able to use any of that to offset lost revenue. But, Figueroa says, it can be used indirectly, to offset unemployment payments from the state trust fund that’s fueled by taxes on employers.
“It’s not a direct payment but what we are planning to do is use these funds to hold the business community harmless, as it were,” Figueroa says.
While most of the federal funds can be channeled through existing state programs, committee members signalled that the legislature may have to approve some of the new initiatives. Sen. Cathy Breen, a Democrat from Falmouth, serves as Co-Chair.
“At least until we are in session again, that is going to fall largely to this Committee and the administration.”
Committee members are being asked to meet again next week to start considering specific proposals.
Updated 5:29 p.m. May 29, 2020.