REVENUE FORECASTERS REJOICE

No good news goes unpunished in an election year, demonstrated by the campaign-style announcement this week by Gov. John Baldacci that General Fund revenues finished $74 million ahead of expectations and the subsequent negative reaction from Republicans, which both sidestepped the point.

The point is that through bipartisan agreement and some fairly difficult fiscal stretches, lawmakers have rebuilt the state’s rainy day fund. It’s not yet near where it should be, but the fund hit $149 million and will continue to grow because of the spending restrictions both parties wanted in statute. Instead of an oversized deposit slip as a prop in his presentation Monday, the governor could have invited Republican leaders to share the stage on what has been, despite many political disputes, a joint effort.

Maine is a long way from fiscally healthy, but it is moving in the right direction. For context, look at a June report by the State University of New York’s Nelson A. Rockefeller Institute of Government, which shows tax revenues for all states up a total of 8.1 percent for the first three quarters of the last fiscal year compared with the same quarters of the previous year. The report notes that the total would have been higher – more than 9 percent – had California not offered corporate tax amnesty the year before. The National Governors’ Association reported similarly strong growth among states.

Maine was distinguished in the Rockefeller report by having the third slowest-growing revenue line among states for those three quarters and was one of only two states to show a decrease in the third quarter. (The other state was California, which would have been in the black, according to the report, if not for its previous tax amnesty.) Still, by the fourth quarter Maine’s revenue growth hit 7 percent.

Maine floats on the national economy, where corporate revenues in particular are up strongly. The state felt some of that gain, as well as increases in individual and sales taxes and will put money into its rainy day accounts and pay down the unfunded liability on the state pension. Sensible, though not exactly exciting. The governor Monday made much of the $74 million surplus in expected revenue, but that’s only 2.6 percent of total revenues – essentially, that figure is confirmation that the state revenue-forecasting panel did its job well.

Republicans, however, matched the governor on the piffle scale. Rep. Josh Tardy claimed the rainy day savings were deceptive because Maine owed hospitals Medicaid money; Sen. Paul Davis said the governor shouldn’t count the revenues because he had extended the pay-off time on the unfunded pension liability.

Both are right about the importance of these debts. But not only did Republicans support the formula for sending money to the rainy day and pension accounts, the two are conflating the new revenues with debts that could not have been paid off because the revenue had not been recognized.

Lurking behind this are two issues – the state’s comparatively slow growth, and the decision by lawmakers to save for the next rainy day appears to be working. Congratulations to all involved.