Cost of Maintaining State Services $125M More Than Expected

AUGUSTA — The estimated cost of maintaining state services for the next two years is $125 million more than the number legislators have been working from, bringing the total General Fund revenue hole to $965 million.

The higher number was one of several developments described in the monthly newsletter of the Legislature’s Office of Fiscal and Program Review.

The $125 million adjustment is due to the inclusion of unfunded future retiree health care costs and a predicted increase in people depending on MaineCare, the state’s Medicaid system.

Grant Pennoyer, director of the Office of Fiscal and Program Review, who writes the Fiscal News newsletter, said national data that the state depends on predicts a rise in Medicaid enrollments in the next two years.

On the revenue side, a recent analysis by the state Consensus Economic Forecasting Commission and Revenue Forecasting Committee revealed that lagging employment rates and decimated capital gains in the past year will combine to erode revenue from corporate and individual income taxes.

The full impact of lower income tax receipts won’t be known until after the April 15 tax filing deadline.

“The economic forecast is very likely to go down,” said Pennoyer. “The question is how much it will go down and how much of that will affect revenues.”

Revenue to the general fund was $4.4 million over budget at the end of January because of a surplus in the income tax lines.

In the highway fund, which supports most of the Department of Transportation and is funded with federal dollars, the revenue picture isn’t much better. A deep structural gap was also predicted for the highway fund, but more than $162 million in federal stimulus dollars for transportation projects will help blunt some of the impact.

Nicole Ouellette

Nicole Ouellette

When Nicole isn't giving advice she's completely unqualified to give, she runs an Internet marketing company in Bar Harbor, where she lives with her husband Derrick and their short dog Gidget. She loves young adult novels, cooking and talking French to anyone who'll talk back. [email protected]