Appropriations Update

The Appropriations and Financial Affairs Committee received positive news just before the election regarding the state’s financial outlook. September’s revenues were up and the projections for October looked optimistic.

Revenue for the month of September was $3.77 million over projections. This puts the General Fund over estimates by $26.26 million more for the first four months of Fiscal Year 2011, which started July 1, 2010.

Personal Income Tax did better than anticipated by $2.78 million for the month of September, putting the tax over estimates by $18.28 million for the year. The Corporate Income Tax was also over anticipated figures by $6.8 million. This is up for the year by $4.6 million.

As I mentioned in a past update, the State of New Hampshire increased their tax on cigarettes and tobacco. The Appropriations Committee thought this would bode well for Maine revenues and it appears it has, as the increase has significantly reduced the number of Maine residents purchasing cigarettes and tobacco in New Hampshire. Maine’s Cigarette Tax brought in $5.26 million over analyst projections for the month of August.

Unfortunately, the Sales and Use Tax came in under projections by $3.37 million for the month. These revenues were based on August sales figures. Compared against sales and use tax figures from August 2009, those revenues benefited from the federal “cash-for-clunkers” program. Many people took advantage of that limited program and purchased new vehicles last year. This year, the Automotive/Transportation sector experienced a 12.5% decline from a year ago. Another reason that there were reduced sales tax revenues in August is because the construction sector also experienced a decline.

Projections for October, though, look to be optimistic. It is looking like revenues could exceed budget estimates by roughly $25 million for the month. The Estate Tax could potentially exceed revenue projections by $6.5 million and Corporate Income Tax is expected to be $20 million over budget for October, while Individual Income Tax is trending on-budget and the Sales Tax will be close to budget estimates.

Maine’s economy has stabilized and we have stopped rapidly losing jobs. Despite the improvement in our state’s economic conditions, growth and economic recovery will be slow over the next few years, as we no longer have stimulus funds to fall back on.

The Consensus Economic Forecasting Committee believes that Maine will see a rebound in manufacturing in the state which could create many new jobs. The global recession really took a toll on manufacturing in Maine. The health care industry is also expected to grow, but much slower than before.

This will be my last update as Senate chairman of the Appropriations and Financial Affairs Committee. I hope you have found these updates useful. As the coming session progresses, I will continue to do my best to keep you informed of the goings on from the State House. Please don’t forget that if you have any questions or comments, e-mail me by visiting my website, www.mainesenate.org/diamond, or call 287-1515.

Senator Bill Diamond is a resident of Windham, and serves the communities of Casco, Frye Island, Raymond, Standish, Windham and Hollis as Senator of District 12.

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