State tax revenue gains promising for year end

AUGUSTA – A legislative staff analysis says key components of Maine’s General Fund revenue look hardy heading into the final two months of the fiscal year.

According to the Legislature’s Office of Fiscal and Program Review, good news on the revenue front includes corporate and individual income tax revenue exceeding revised projections.

The monthly fiscal report adds, however, that high fuel prices may have a detrimental effect on the collection of consumption-related taxes in coming months.

For the short term, though, the staff analysis suggests that the revenue picture for the General Fund seems positive.

“March corporate and individual income tax collections were above revised projections and April’s revenue continues this trend pointing to a positive April surprise of roughly $45 million for the income tax categories,” the OFPR newsletter for April says.

“If oil and gas prices stay at their very high levels, some of this positive surprise may be offset with negative variances in consumption-related taxes over the final 2 months of fiscal year 2008 and into fiscal year 2009. The Highway Fund is particularly at risk given its dependence on fuel taxes.”

Last week, after state officials returned from a trip to Wall Street, Commissioner Rebecca Wyke of the Department of Administrative and Financial Services said she thought the state would not lose ground with the rating agencies, but added she wasn’t counting on winning upgrades from the current double-A levels.

On March 31, the Legislature gave final approval to a state budget rewrite to offset a $190 million shortfall in Maine’s $6.3 billion two-year General Fund budget.

The supplemental package made a range of cuts with no new broad-based taxes.

Since then, Democratic lawmakers, with the support of Gov. John Baldacci, pushed through a bill to bolster Maine’s Dirigo Health program in part by broadening beer and wine taxes. The financing package also imposes new wholesale taxes on soda and syrup while replacing a controversial savings offset payment targeting insurers with a 1.8 percent surcharge on paid claims.

Business organizations have been weighing whether to undertake a referendum challenge to the new Dirigo Health law. One people’s veto proposal backed by the Greater Bangor Young Republicans already has been filed with state election officials.

If the General Fund ends up with a surplus after fiscal 2008 closes on June 30, excess revenue would be channeled to various accounts. Potential beneficiaries include the Maine Budget Stabilization Fund and the MaineCare program for hospital payments.