Maine lawmakers to face $14 million budget gap

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AUGUSTA — Budget. Budget. Budget. 

So goes the abbreviated session of the 125th Legislature, which will tackle three spending plans this session. None will be easy.

Lawmakers have already begun wrangling two budgets at the Department of Health and Human Services, but thanks to declining revenues and soaring oil prices, they can expect a third supplemental budget before they adjourn in April.

The third budget will attempt to fill an estimated $14 million gap in the General Fund, according to an analysis by the state’s Revenue Forecasting Committee. The panel meets twice every year. 

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Unlike the DHHS budgets, meeting that shortfall likely will require multiple trims across all of state government. 

State officials had been girding for the shortfall since learning earlier this month that the state’s seven months of revenues were $29.8 million off initial projections. The downward trend was underscored in January when revenues were well off estimates calculated in the fall. 

According to Finance Commissioner Sawin Millett, several factors are contributing to the under-performing revenues, including declining sales-tax revenues, corporate income taxes and service provider taxes. 

Millett said some of those budget lines could be attributed to the difficulty of projecting revenues in January because some companies file returns on the calendar year, while others do it on the fiscal year. He said the corporate lines have been among the state’s strongest revenue sources over the past 16 to 18 months. 

More worrisome, he said, were factors that the state can’t control: spiking oil prices and economic turmoil in the European Union. 

The state’s two-year budget was formulated when oil was about $88 per barrel, Millett said. This week, the price jumped above $105 per barrel, a nine-month high. The hike followed Iran’s decision to stop crude exports to France and England in advance of forthcoming economic sanctions.

Commodity forecasters say the barrel price could climb to between $120 and $135. 

Mainers would see those prices at the gas pump, Millett said. Combined with stagnant job growth, that could mean less discretionary spending by Mainers, and thus, lower sales-tax revenues for the General Fund. 

Millett said his office was still hammering out details of the next supplemental budget. The proposal could be unveiled in March before going to a public hearing. 

Meanwhile, lawmakers are still working on a pair of DHHS budgets. The first spending plan will fill the $120 million Medicaid gap for fiscal year 2012. The budget had received bipartisan support after several weeks of contentious debate among lawmakers. However, the compromise plan stalled in the Senate last week. 

The 2013 portion of the DHHS budget won’t be addressed until the 2012 plan is ratified. 

smistler@sunjournal.com

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