Attacks pose new threat to state economy King calls meeting with advisers

AUGUSTA – The sharp economic downturn across the nation in the aftermath of this month’s terrorist attacks could deal yet another blow to Maine’s already sluggish economy.

Gov. Angus S. King was so concerned Tuesday over the prospects of state revenue shortfalls, he said he will call a meeting of his economic advisers this week to try to assess the potential threat to state spending.

“Given the weakness in the sales tax and the potential effects of the attack, I’m going to be looking at some projections based on various scenarios and, if necessary, take steps to rein in state spending in anticipation of a negative effect that may have been occurring with or without the events of Sept. 11,” King said.

The governor declined to detail what cutbacks he might consider. He continued, however, to insist that Maine consumers should not let a lack of confidence in the economy curtail their spending plans.

“The economy is huge and there’s no objective reason that [the attacks] should undermine that very powerful economy unless we ourselves lose confidence in it,” King said.

Laurie LaChance, state economist, said Tuesday that sales tax collections were off by nearly $7 million during the first two months of the current fiscal year that began July 1. She said recent state reports indicated that total individual income tax collection also were below projections for that same period.

“Sales taxes are continuing to be weak and [we are also] below projections on corporate and individual income tax,” she said. “The income tax has been holding us up for quite some time. That has suddenly started to show some weakness.”

King said it was difficult to identify a clear economic trend based on “one or two months.” September’s revenue figures are still being assessed, but the governor maintained there was no reason to think the monthly sales tax figure will be any better when the final numbers are in.

“I don’t think there’s going to be much doubt that there will be a downturn in September because nobody was spending any money for about 10 days,” King said. “I’ve talked to people in the mail order business and the hotel business and everything is down. The real question is what’s it going to be like in the middle of October and November and what’s Christmas going to be like?”

Although summer tourism income failed to reach expectations due to a very rainy June, King said traffic on the Maine Turnpike reached an all-time high in August. As the state nears the peak of its leaf-peeping season, the governor speculated that plummeting airline ticket sales should not have an impact on Maine foliage tours since 90 percent of fall tourists arrive in the state by car.