Economic forecast adjusted State panel expects weaker job growth, increased inflation

AUGUSTA – A state advisory panel dropped its forecast for 2008 job growth in Maine sharply on Tuesday while solidly boosting its estimate of personal income growth for the current year.

The Consensus Economic Forecasting Commission also increased its projections for inflation for 2007 through 2011.

The result, said state government analysts, was to leave more thinking about budget-related revenue to a second panel that must report to the governor and legislators by Dec. 1.

“A lot of the key variables” weighing on an adjustment in revenue projections “have yet to be forecast,” said Grant Pennoyer, the director of the Legislature’s Office of Fiscal and Program Review.

Up for consideration by the state Revenue Forecasting Committee, a panel including representatives of the Legislature and the Baldacci administration that can make actual changes in current revenue estimates, are the outlook for corporate profits, energy prices and capital gains, Pennoyer said.

Legislative fiscal staff analysts already warned last month that revenue projections built into the state’s $6.3 billion General Fund budget, which took effect for two years beginning July 1, may have to be reduced.

Michael Allen, the director of econometric research at Maine Revenue Services, which is the state taxation department, echoed Pennoyer in suggesting that expectations for capital gains, energy prices and corporate profitability would be key for upcoming revenue forecasting decisions.

“Anything they did today isn’t probably going to lead to major changes in what we recommend to the Revenue Forecasting Committee,” Allen said.

New numbers from the Baldacci administration show General Fund revenue running about $5 million – less than 1 percent – below budget estimates for the first three months of the 2008 fiscal year.

Areas of concern include cigarette and corporate income taxes.

“Corporate income tax receipts were under budget by $2.8 million in September,” Commissioner Rebecca Wyke of the state Department of Administrative and Financial Services wrote in a monthly report released Tuesday.

“Year-to-date corporate is under budget by approximately $10 million. September was an estimated payment for calendar year filers and was 4 percent below last year.

“The weakening in corporate income tax that Maine has been experiencing since the end of 2006 is now being reported by most other states and the federal government,” Wyke wrote.

The Consensus Economic Forecasting Commission, which is led by University of Southern Maine professor Charles Colgan, on Tuesday dropped its projections for wage and salary employment growth from 0.7 percent to 0.5 percent for 2007, from 0.8 percent to 0.3 percent for 2008 and from 0.8 percent to 0.6 percent for 2009.

At the same time, three years of estimates for personal income growth – from 2007 to 2009 – were boosted from 4.3 percent to 4.9 percent for the current year, reduced from 4.5 percent to 4.4 percent for next year and held steady at 4.5 percent for 2009.