A new forecast on state revenues estimates that Maine will collect $75 million over projections in the biennial state budget that ends in June 2021.
According to a report in the Portland Press Herald, the Revenue Forecasting Committee discussed preliminary estimates at a meeting last week in Augusta, and was due to present its final forecast to Gov. Janet Mills this week.
Early figures show sales and use taxes could surpass budgeted amounts by $40 million, while individual income taxes will produce an additional $27 million.
The committee is comprised of top finance members of the state government, including State Economist Amanda Rector and Michael Allen, committee chairman and Maine’s associate commissioner for tax policy.
According to Allen, the forecast, which also looks at incoming revenues for fiscal years 2021, 2022 and 2023, was meant to be conservative due to an expected slowdown in wage growth for Maine and much of the country.
Even though revenues are predicted to pick up, the growth rate will drop from 7.3 percent in 2019 to 2.8 percent in 2020 and 2.1 percent in 2021, due to sluggish advancement in wages.
“We’ve seen pretty strong wage growth throughout 2019,” Allen said. “Starting in fiscal year 2021, that is when you are going to see this wage growth start to decelerate.”
That could affect general fund revenue growth in 2021, he added.
Maine’s tight labor market plays a part in slow wage growth, Rector said.
“Without sort of adding lots of workers, that wage growth is going to slow and peter out over the years,” she said.
The committee also plans to consider the state’s new tax on vaping products, taking effect in January, along with federal income tax reforms and the effect those have on state income tax filings.
With the current stock market and economy strong, Allen said Maine’s revenue growth could keep outpacing the forecast. He noted that miscalculations have happened before, leading to unanticipated declines in revenue.
“But I don’t think we can sit here and say the next eight months of the fiscal year are going to be a complete disaster,” Allen said. “I don’t know what kind of story to tell that would lead to that.”