The State Revenue Forecasting Commission says that the state will lose an estimated $524 million in general revenues by the end of next June as a result of the pandemic. But the group is less certain of the forecast than it has been in past projections.
Throughout the Commission's Wednesday meeting, two words dominated: uncertainty and unprecedented.
“This is our best estimate, given the information we have today, and the assumptions that both the Consensus Economic Forecasting Commission and other economic forecasters have made about how the pandemic is going to play out over the next six months to a year,” says Associate Commissioner for Tax Policy Mike Allen, who chairs the Commission.
And the assumptions of the economic forecasting group are major reasons for uncertainty. For example, the economic panel is assuming Congress will continue economic aid at a level of at least $1 trillion, and that the aid includes some additional help for states and municipalities that are seeing less revenues. It also assumes more direct aid to individuals and businesses. So what Congress does, or does not do, will affect the estimate as will the length and severity of the pandemic.
Allen says this recession is unprecedented in that it has been caused by the pandemic and not by traditional reasons.
“This recession is totally different, in that it is hitting the service sector, rather than the goods side of the economy, and one reason for that is all the federal stimulus that has been provided to households.”
Allen says that means all the experience gained from dealing with past recessions is not helping to assess the impact of this recession. The panel is projecting cities and towns will lose about $20 million from the state because of the expected decrease in state revenues.
In a statement, Gov. Janet Mills says the revenue loss is a serious challenge to the state but she has not decided how she will address the situation. She says Congress needs to pass another pandemic economic package before the state has a clearer picture of its financial resources.