AUGUSTA – Members of the Legislature’s Appropriations Committee got more bad news Monday. State revenues may fall even further below estimates when the budget year ends next week.

“It’s not encouraging,” Finance Commissioner Janet Waldron said as she explained that income tax revenues are continuing to be below estimates, and for the first time there is concern sales tax receipts also will not meet projections.

“We are concerned that [income tax] withholdings will not meet projections. And now we have to be concerned about the sales tax as well,” she said.

Revenues are expected to be $171 million below estimates for the two-year state budget that ends June 30, 2003. But Waldron said the revenue shortfall for the current budget year that concludes next week could increase by as much as $25 million when this week’s tax receipts are counted.

“The culprit, at this point, that we are looking to is probably automobile sales,” said Mike Allen, research director at Maine Revenue Services, in explaining the sales tax dip. He said car sales were up 9 percent over last year and many analysts believed that increase was artificially high because of sales incentives, and could not be sustained

“It appears now, both here and nationally, that is true,” he said.

Allen said sales tax revenue was $11.7 million lower than expected this month as of last Friday at the close of business. He said his “best guess” with a week left in the fiscal year is that income tax revenues will be below estimates by $3.5 million this month as a result of withholding payments that are significantly less than projected.

Members of the panel were concerned with the news, and puzzled. Rep. Randy Berry, D-Livermore and the committee co-chairman, asked Allen and Waldron to explain why the state unemployment rate continues to be below the national average, and yet income tax revenues are declining.

“This just doesn’t make sense to me,” he said.

Both Waldron and Allen said they are not sure why the income tax payments are not meeting estimates. Allen said it “might be” because many Mainers adjusted their withholding amounts after filing taxes in April.

“People may have concluded they were paying too much and reduced their withholding;” he said. “We don’t know for sure.”

The panel also discussed Gov. Angus King’s proposal to meet the budget shortfall, with several members expressing concern that many of his proposals are controversial and will face difficulty in garnering enough votes for passage. But members of both parties praised the effort made by the King administration to draft the plan.

“There are things in here I don’t like,” said Rep. Richard Nass, R-Acton, “but I think it is a good effort at trying to balance the budget. But even this may not be enough given what we have heard today about the revenues.”

Sen. Mary Cathcart, D-Orono, agreed with Nass. She said the plan to cut the budget for state aid to education is “very troubling,” although she also praised the King administration’s efforts to develop the budget proposal.

“We need answers to a lot of questions before we can start dealing with this as a committee, let alone have the whole Legislature in here,” she said.

Sen. Jill Goldthwait, a Bar Harbor independent, is the co-chairman of the committee. She said many of the proposed policy changes in King’s plan are controversial with lawmakers and will likely face opposition.

“But I think this committee can come up with a solution, if we are allowed to,” she said.

Goldthwait also is concerned that the closer to the fall elections lawmakers are, the more difficult it will be to pass any budget package. Still, she expressed her belief that the Legislature as a whole will be able to reach an agreement.

“But it is not going to be easy,” she said. “It’s going to be very tough.”

After much discussion, panel members seemed to agree they will not have all the revenue and budget information they need to start detailed work on a solution until the end of July.