Forecast looks brighter in ’02 for Mainers New growth may reduce deficit

AUGUSTA – Maine’s economy is doing a little better than projected just a few months ago, agreed members of the aptly named Consensus Economic Forecast Commission at a State House meeting Thursday. But, how that translates into additional tax revenues won’t be known for several weeks.

“I certainly can’t speak for all of the members of the Revenue Forecasting Commission,” said state economist Laurie LaChance, “but I think what we have agreed on today will translate to additional revenue in the magnitude of $50 million.”

LaChance is not a member of the economic forecasting commission but sat in as chairman of the revenue forecasting group. The economic panel is appointed by Gov. Angus King and legislative leaders and develops a projection of Maine’s economy that is used by the separate revenue panel that predicts state revenues.

Last November, the economic commission concluded the national recession and the Sept. 11 terrorist attacks would not only slow down job growth, but would result in a net loss of jobs in the state. That forecast, along with the fear that consumers would curtail spending and that the national economic picture was darkening, led to state revenue projections being revised downward by nearly $248 million for the remaining year and a half of the state’s two-year budget cycle.

“I think we may have been too pessimistic,” said John Davulis of Central Maine Power Co. “I feel better about the economy now than I did then, but we still have problems.”

After pouring over charts, graphs and reams of computer printouts, the group reversed its position and predicted there will be 0.5 percent job growth in the Maine economy over the rest of the two- year budget cycle.

“Well, we agreed on the five-tenths of a percent job growth figure, but I think you saw that most everyone here was talking about a range of numbers,” said University of Southern Maine economics professor Charles Colgan, chairman of the economic commission. “I think we do all agree there will be growth, but would be more comfortable with a range. But they need to have a figure they can plug into their computer model to generate revenue projections, so that’s the number.”

Some members of the panel felt the job growth over the next year and a half would be very slight, but others believed the number of jobs in Maine could grow by as much as 1 percent. That’s more than 6,000 new jobs. Michael Donihue, chairman of the economics department at Colby College, said he is optimistic the economy is improving.

“I guess I am the optimist,” he said, “but when I look at all of the factors, I think we may have bottomed out.”

Leon Bien, vice president of Citizens Bank in Portland, was not as optimistic. He joined the deliberations by phone and agreed there might be some job growth, but not as much as Donihue expects.

“Maybe I got up on the wrong side of the bed this morning,” he said, “but while I feel more positive about the economy, I don’t feel that positive.”

Several positive indicators were helping to fuel the discussion. State unemployment levels continue below the national average and the number of persons filing for unemployment benefits for the first time has decreased. And one factor panel members kept returning to was that state revenues have not decreased as they expected. Even with the downward revisions of November, state revenues year to date are $9.3 million above the latest estimates. And early indications are that January’s revenue figures, when they are completed later this month, will be about on target.

“A lot depends on what we get today [Thursday] in quarterly filings,” said Mike Allen, director of research for Maine Revenue Services. “Withholding has been holding its own and estimated filers have been down somewhat.”

Once those figures are in, Allen will use the data along with the economic forecast to crunch the numbers in the MRS revenue-forecasting model. The results will be the basis for the Revenue Forecasting Commission to formally re-project what state revenues should be through the remaining months of the two-year state budget cycle.

“It’s not just numbers from the model,” cautioned LaChance. “The whole [Revenue Forecasting] Commission has the final say on what we re-project.”

She said members would try to “get behind” the numbers in an effort to make the revenue projections as accurate as possible. It may be difficult to make them any more accurate, however, than what was projected in November. Revenues are now less than 1 percent off that projected amount.

“But on a $2.4 billion budget, that still ads up to millions of dollars,” Colgan said.

While saying it’s good news that there will be additional funds for state programs, Sen. Jill Goldthwait, an independent from Bar Harbor and co-chairwoman of the budget writing Appropriations Committee, said that will not make the committee’s work any easier.

“We are still going to have to make some hard decisions,” she said. “We may have more money, but we have far more demands than we can ever meet.”