Chasing the money
State revenues slip in June
Surplus expectations reduced
Sales and income taxes scrutinized
State revenues dipped in June, $4.8 million below estimates to reduce the revenue surplus for the budget year that ended June 30 to a little over $20 million. The total surplus will not be computed until sometime in August but there will not be enough to meet the $40 million in allocations hoped for by lawmakers.
Finance Commissioner Sawin Millett said the state will have a small surplus, probably less than $30 million out of expected yearly revenue of just under $3 billion.
Millett said he will continue to closely watch the individual income tax and the sales tax as the two largest sources of revenue. He said both indicate the state is still feeling the impact of the recession and lingering consumer concerns.
“We are not seeing the strong growth in employment that we had hoped to see; it's pretty flat,” he said. “On the sales tax side, I think there is a decline in consumer confidence and some uncertainty about the future. People don't seem to be making — outside of [autos] — big-purchase investments.”
He said the overall surplus is the revenue surplus plus any unspent balances and that will be computed in August. He said unspent balances usually are between $5 and $10 million.
The budget law allocates where a surplus will go. The governor's contingency account gets restored and the reserve fund at the Finance Authority of Maine gets a million dollars before any other allocations. Then the next $15 million goes toward a one-time cost of living adjustment for state retirees, and the next $25 million will go to hospitals for payments owed. It is clear the hospitals will not get the full $25 million.
“It's disappointing that there is not more of a surplus to help our local hospitals,” said Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the Legislature's appropriations committee.
Sen. Richard Rosen, R-Bucksport, the co-chairman of appropriations, shared Rotundo's concern that the surplus will not be large enough to ease the debt owed hospitals.
“We did change the payment system in this budget so that hospitals are being paid for services on an ongoing basis,” he said. “This does mean the new Legislature will have to deal with a larger problem.”
Steve Michaud, president of the Maine Hospital Association, said the payment change is a “huge” improvement for hospitals, but they are still facing debt of about $460 million from past years.
“The $25 million would have leveraged another $50 million in federal funds and it would have been a good down payment,” he said.
Tax policies could hammer Maine revenues
Federal reforms in the air
No action expected until post election
If Congress does not act to extend current federal income tax rates set to expire Dec. 31, Mainers will see a huge tax increase of $1.4 billion in 2013 that will result in lost state revenues and will hurt the state's economy. Members of the state's congressional delegation say it's unlikely the issue will be resolved until after November elections.
“If we don't act, all the states will feel the impact,” said U.S. Sen. Olympia Snowe. “We should not wait until the lame duck session to deal with this very important issue.”
She said the best way to handle the various tax rates, credits and deductions is by an overhaul of the entire tax system and not by simply extending the existing tax provisions. She said the Senate Finance Committee on which she serves has done considerable work in drafting a simpler and fairer tax code and she hopes reform can move forward, but said she supports an extension if reform cannot be achieved.
The biggest change would be in tax rates, raising the lowest tax bracket to 15% from 10%, and increasing the top bracket from 35% to 39.6%.
“We know there would be a significant impact on state revenues” and the economy, said Maine Finance Commissioner Sawin Millett.
He said the state has not estimated the impact on the state's economy, noting Congress might make changes that would affect any estimate, such as President Obama's proposal to extend the tax rates and other provisions only for those married with less than $250,000 a year in taxable income.
“I do think the president is right,” said U.S. Rep. Chellie Pingree. “We have given the wealthiest in this country a break for a very long time and I think we have to go back to asking people to give their fair share.”
She said while she supports the president's proposal, she understands a compromise is more realistic.
U.S. Sen. Susan Collins supports extending the current tax policies until a comprehensive tax overhaul can be passed. She said partisan conflicts in Congress are preventing consideration of a lot of important issues, including tax policy.
“The economy is still fragile,” she said, “but we should not wait on comprehensive tax reform because of the impact delay has on the engine of job growth, small business.”
Collins said even though floor speeches have started and there have been some preliminary votes, a resolution is not likely until after the elections.
U.S. Rep. Mike Michaud said there will be considerable pressure on Congress to extend current tax rates and policies because of the impact on individuals, as well as the states. He also supports the president's plan to only extend tax breaks to those making less than $250,000 a year.
Michaud said even if gridlock prevents a lame duck session from passing legislation, he expects it will be quickly addressed by the new Congress in January.
STEM initiative not reaching eighth-graders
Career connections not being made
Council searches for best pactices
One of the signature initiatives of the LePage administration is to encourage Maine students to pursue careers in science, technology, engineering and math, the so-called STEM initiative. The most recent data indicates they have a long way to go with more than two-thirds of eighth-graders surveyed in Maine saying they have not been exposed to engineering and technology as a career.
“I certainly am surprised at that number,” said Sharon Eggleston, the chair of the new state STEM Council. She is a senior project engineer with Lockheed Martin in Bath and said she has been involved in outreach efforts in Maine schools for 15 years, but acknowledges such a large number of eighth-graders saying they have not been exposed to a STEM career is a concern.
“We do bring these experts into the schools they do talk about what they do,” she said, “but that student who still has another eight years or six years of school … it's difficult for them to get that connection.”
Eggleston said she hopes the council explores successful school programs to compile best practices that can help expose students to STEM careers.
Education Commissioner Steve Bowen said the responses by eighth-graders to questions on the National Assessment of Education Progress test raise concerns. He said it is clear that the demand for college graduates in the STEM professions, as well as the need for advanced degree holders in the fields, will grow.
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