With the opening of the next legislative session in January, the roles the Maine public has become accustomed to will once again be played out: Republicans will call for tax cuts; Democrats will demand funding for various programs; and Gov. Angus King will urge, above all else, caution. The governor’s role will be more difficult to fulfill, however, now that his prime weapon, the so-called structural gap in the budget, has disappeared.
The structural gap is the difference between the projected spending in the next budget and the level of projected revenues. At the end of the last session, Maine indeed had a projected gap of approximately $320 million for the 2002-03 budget. Since then, however, the state’s forecasters have projected revenues for that period to increase by $327 million. No gap, and maybe even a little surplus besides.
Because the structural gap measures moving targets — revenues and budgets — a gap probably will reopen by the time lawmakers are finished deciding what to do with the $250 million surplus in the current budget. Whether that means anything, however, won’t be seen until next year’s revenue numbers come in.
A projection many months before the next opportunity to amend the budget is fine for accountants but largely meaningless for everyone else. These projections, in effect, predict a cliff 25 miles away and assume lawmakers won’t have the sense to turn the steering wheel before driving off it. Though some members of the public might think 25 miles is not enough warning, adjustments to the budget are not at all unusual.
Second, projections for the last four years have always pushed expected revenue levels higher. Part of the reason for this is a national economy that has fooled forecasters in all states. But in Maine it may also be caused by the tax structure, which reacts more dramatically to changes in the economy than elsewhere. When times are good, they are very good for Maine government; when times are bad, Maine government quickly gets in deep trouble. The culprits here are such things as the state’s narrow sales tax base and its steep income-tax bracketing. These are obvious opportunities to smooth out the economic roller coaster.
The lack of a structural gap hardly leaves the governor without material for his role — he can find several other reasons for Maine to be cautious about increased program funding or tax cuts. But the structural gap, whatever its value as a budget indicator, is not among them, at least for now.
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