🔒Capitol Update | State eyes red ink

Red ink watch

• Sales tax receipts off
• Tourism sales disappoint

State sales, individual income and corporate income taxes failed to meet projections in August; overall state revenues were $19 million below estimates. That puts state revenues after two months of the budget year in the red by $4.8 million.

"The overriding concern really deals with the sales tax," said Finance Commissioner Sawin Millett. "We started off this year, last spring, with strong growth that seems to have tapered off and now we are looking at sales taxes not meeting estimates."

He said even accounting for the adjustments made every August to the sales tax to reconcile the books from the previous budget year, the tax is not meeting projections. He said if that continues it will pose a significant budget issue in the next session.

"You have to worry as long as that $4 a gallon gas price stays people are going start making decisions on what they can spend," Millett said. He said some folks are already filling their oil tanks for the winter heating season and paying close to $4 a gallon for heating oil.

"The revenue forecasting committee may well have to re-project revenues when they meet in November," he said.

The sales tax was below estimates in July by a couple of million dollars, but that grew to $6.7 million after the first two months of the budget year. Sales taxes paid to the state in August reflect collections merchants made in July.

"Given the warm and dry weather in July, the tourism-related areas of restaurant and lodging sales were disappointing," Millett wrote in a memo to Gov. Paul LePage and legislative leaders. For example, he said, restaurant sales were only 1% above a year ago and lodging was up 2.4%.

"The state of Maine figures seem to be in line with some of the alarm bells that have been sounding nationally," said Sen. Richard Rosen, R-Bucksport, the co-chairman of the appropriations committee. "I think we are seeing an overall slowing in the pace of the recovery."

Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the panel and a former co-chair of the committee, said the sales tax is a good measure of how average Mainers are doing. If they are optimistic, they spend more on goods and services, but if they are worried, they tend not to spend any extra money and save it for future expenses.

"We were hoping that July was a blip," she said, "[but] with this second month coming in below [projections] there has to be a concern here that there may be a trend."

The individual income taxes were close to estimates in August.

School funding study starts

• Distribution formula under review
• Political minefield awaits

Property tax bills for business are significantly determined by how much state aid a municipality gets for running its schools. National consulting firm Picus & Associates is studying ways to design a fairer distribution system.

The $400,000 study is supposed to make recommendations to the Legislature; lawmakers are acutely aware a change in the distribution of the nearly $1 billion a year in aid will have winners and losers.

Maine aid is distributed through a formula called the Essential Programs and Services model. The funding law determines which programs schools offer will get partially funded by the state.

For decades, lawmakers have battled over what is a fair way to distribute school aid.

"Over the past four years that I've been in the Legislature, every year people have said the funding formula does not work, is not working, especially in rural areas," said Sen. Brian Langley, R-Ellsworth, the co-chairman of the Education Committee.

In fact, ever since the state started distributing aid to local schools there have been complaints. Sen. Justin Alfond, D-Portland, a member of the committee, said the study is needed to address questions about fairness.

"When you go into schools and you go into districts, the No. 1 question by far is, 'Why don't we get more money?'" he said. "Our community has all the right ingredients to get more money. I think we need to have the study to finally put some of the questions to rest."

Committee members worry a new formula aimed at improving fairness will run up against lawmakers voting according to how their communities fare under the plan, called "print-out" politics.

"But I think if we can have the overall conversation about fair and equitable and come to some agreement on those facets of the study, then maybe that will help us through implementing changes," said Langley.

Langley said recommendations have been phased in over a period of years in other states, and that may have to happen in Maine. Education Commissioner Steve Bowen is a former lawmaker and shares the concern that even with an independent study, voting for a formula that reduces aid to your town will be a tough sell.

"For the sake of all the kids of the state, we've got to put aside sort of our local views on these things," he said.

Bowen said he expects lawmakers will have recommendations to consider in the next session.

Prison work crews increase

• Program saves taxpayers thousands
• Low risk to public

Work crews of inmates from state correctional facilities are providing state agencies, as well as local schools and towns, with hundreds of thousands of dollars worth of repairs, construction, road work, painting and other maintenance every year.

"We use $10 an hour as a value for the labor," said Corrections Commissioner Joe Ponte. "We have some jobs we do that are more sophisticated and the labor is worth more than that."

For example, he said, there are work crews that overhaul surplus military vehicles and add tanks to carry water for the Forest Service. He said there are also inmates that make or refurbish furniture that has been used by state agencies.

"Some of those jobs are worth a lot more than painting a fence or clearing brush," Ponte said. "If you put a better estimate on the value of the work, we could be in the millions of dollars a year."

He said in 2011 the work crews provided 39,201 hours for projects that ranged from remodeling offices to bridge maintenance to clearing snow from the roofs of state and municipal buildings.

"It's a good service, both for the community and for the inmates and crews that go out," Ponte said. "The inmates feel good about giving back to the community."

The agency is on pace to significantly increase the number of hours provided by the inmate work crews. In 2010 there were 22,890 hours of projects provided by the work crews. In the first six months of this year, the crews have provided 21,160 hours of projects.

"I think it is important to stress it is not just anybody that is out on these crews," said Rep. Gary Plummer, R-Windham, co-chairman of the Legislature's Criminal Justice and Public Safety Committee. "These are people who are trustees who have shown they can behave themselves … there is very little risk from these inmates."