AUGUSTA — Making predictions about the future of Maine’s economy and the flow of revenues into state coffers is a difficult task even under normal circumstances, but a committee of financial and economic experts found that the present situation is far from normal.
The state’s Consensus Economic Forecasting Commission met Friday in Augusta to pin down predictions for the next few years in areas ranging from population growth and decline to tax receipts across a number of categories. The verdict was that Maine’s economic recovery will come more slowly than the nation’s.
The predictions made Friday will provide the basis for another group, the Revenue Forecasting Committee, to gauge the future of state revenues during its meeting next month. The latter predictions will directly affect the state budget in both the current biennium and the next one.
Changes in state and federal tax codes, the federal government shutdown and the prospect of another congressional fight over the federal budget and debt ceiling later this year mean quantifying data that’s even a few weeks old is fraught with risk. Mike Allen, director of research for Maine Revenue Services, said that because data that indicates what effect the government shutdown had on sales and income tax receipts won’t be known until the third week of November, making predictions at this point is to some degree a guessing game. Compounding the task are sales, meals and lodging tax increases that took effect on October 1, whose early effects also won’t be quantified for several more weeks.
“It’s possible that because of the tax increase that happened October 1, some people shifted some purchases out of October and into September,” said Allen. “The other factor is how did that shutdown affect people’s buying? The story nationally is that it did significantly and that things really dried up in that first part of October.”
Allen said for those reasons, it may not be until the next forecast in March 2014 that the future of Maine’s economy becomes clearer.
“We’re just going to have to wait and see,” said Allen. “Certainly what happened today should dampen [next month’s] revenue forecast a little bit.”
The state’s largest revenue streams come from income and sales and use taxes, which both were above budgeted amounts for the month of September and year to date, according to Allen’s data. However, there were several smaller categories running below projections.
James Clair, who has been involved with state finances for years, is chairman of the Consensus Economic Forecasting Commission. He said early indications are that Maine’s economy is improving, though more slowly than previous projections and the national average.
“We see a continuation of growth, albeit small growth,” said Clair. “The part that we’re trying to wrestle with specifically is what the turning point [in the economy] will be. We’re concerned that Maine is going to continue to lag behind the rest of the nation.”
Clair and Allen both said they expect that state revenue projections will have to be pulled back to some degree. Clair said business owners like himself are watching national events closely and that the temporary extensions of the budget and debt ceiling until January and February, respectively, mean that the effects on the economy could end up worse than they already are.
“We want certainty,” he said. “Things like what happened a couple of weeks ago, and what could happen three months from now, could really create uncertainty.”
That goes for individual Mainers too, said Allen.
“We’ve got to think about the holiday season and the lingering effects of the last [budget and debt ceiling] negotiations in Washington as well as the future impact of future negotiations,” said Allen. “Those should be happening right in the middle of the holiday season, right as people are out shopping. That’s not a good thing.”
Events outside Maine haven’t always had such an effect inside the state, said Allen.
“Years and years ago you could look at Maine as almost its own little island, certainly affected by what’s happening nationally but very contained,” he said. “That type of thinking is just gone. You don’t only have to worry about what’s happening nationally, you’ve got to think internationally.”
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