Maine has raised its tax revenue projections.
The state legislature’s Revenue Forecasting Committee presented revised revenue projections to lawmakers on Friday, adding $233 million in revenue to the balance of the current fiscal year ending in June as well as a $71 million surplus expected for the $10 billion biennial budget passed at the end of March for fiscal 2024 and 2025.
The committee reported that tax collections in the fourth quarter of 2022 and the first quarter of 2023 were boosted by better-than-expected consumer spending and employment rates, putting the new predictions 3% above the original forecasts.
The report noted “ongoing heightened uncertainty in economic conditions” but said it did not anticipate a recession to cut into future earning expectations in the short term as the state rides out the inflationary environment, adding that “inflation and interest rates, demographic changes, access to housing, and a tight labor market” remained risks to continued economic growth.
Rising wage rates, strong consumer demand, and generally positive corporate profits have reduced the immediate threat of a recession, and officials believe “that a period of slow economic growth sensitive to the Federal Reserve’s policy of gradual increases in interest rates is likely to continue for the next year,” the report said.
Gov. Janet Mills, a Democrat, saw her original budget proposal hacked in two last month as separate bills for operating costs and new spending proposals were drawn up and the the latter set aside for future consideration in order to garner enough support among the statehouse’s Republican minority to pass a baseline spending plan and avoid a shutdown.
The new funds must be allocated by the legislature and Mills wants to restore some of the spending proposals cleaved from her original budget, including $123 million for state health services, $55 million for higher education, and $30 million for a rental assistance as the state attempts to head off a local housing crisis.
She is also seeking $400 million for the Maine Department of Transportation as it carries out a three-year capital improvement plan that calls for expansive construction or upgrades to bridges, rail lines, and municipal road improvements.
The DOT’s plan calls for $80 million in funding set aside to meet obligations on around $186 million in debt associated with development grant bonds issued for improvements.
“Maine continues to stand on strong fiscal footing thanks in part to our responsible approach to budgeting and our strategic investments that have supported Maine people, strengthened our economy, and led to record high savings,” Mills said in a statement. “I look forward to working with the Legislature in the coming weeks on these issues.”
Democratic Rep. Melanie Sachs, chair of the Appropriations and Financial Affairs committee, said in an emailed statement she will work on securing funding for some of the proposals axed from Mills’ original budget, continuing “critical investments in education, behavioral health care, substance use disorder treatment, property tax relief and investments in our childcare workforce.”
Republicans are committed to funding a series of middle-class income tax cuts left out of the passed budget, as well as the revival of a law that would cap new spending in budgets at $9.9 million.
Maine currently has $589.7 million in outstanding general obligation debt to which Moody’s Investors Service assigns an Aa2 rating with stable outlook.
S&P Global Ratings assigns its AA rating with a stable outlook to the state’s GO debt, on par with its issuer default rating.
S&P said the score reflects Maine’s “solid budgetary controls, allowing it to maintain fiscal balance and a low long-term liability burden.