AUGUSTA – Are Maine’s books getting cooked by state finance officials? How could the state of Maine possibly have collected increased revenue with the state’s economy in free fall in the month of April? Those are the questions you might ask when you see the new revenue report released by the Mills administration that claims state revenue increased in the month of April.
With about 100k Mainers on their way to the unemployment line and huge pieces of Maine’s economy shuttered, state finance officials have distributed a revenue report that says Maine’s revenue was actually up by $16 million in the month of April. Despite many retailers, even entire shopping malls, being closed in April the report claims state revenue from the sales and use tax was only down $16 million, or about 13%. The report also says that revenue from the individual income tax was up $26 million, or 7.5% over state budget projections.
The claims have raised eyebrows and concerns in public policy and state budget circles where people wonder how the numbers in the report could impact the state budget as the budget year comes to an end in June.
One line of the revenue report is clearly out-of-step with the rosy revenue numbers in the report and would have exposed the report as false if state officials had not sought to explain what they had done.
Under state law, Maine’s revenue sharing program requires the state of Maine to pay out a percentage of all sales and income tax revenue to Maine’s cities and towns in revenue sharing transfers. In the same report that the state reports that revenue increased, the state only paid out about 1/3 of the amount in revenue sharing transfers compared to what they would have paid out if that amount of revenue had actually come in.
Of the $13.3 million the state would have paid out on the projected April revenue, the Mills Administration only reports paying out $4.76 million, or about 36% of the predicted amount. That is a reduction in revenue sharing transfers of almost two-thirds, yet the revenue report claims the incoming sales and income tax revenue that sets the formula for the transfers increased slightly.
That suggested one of two things was happening: 1) The report was dramatically overstating how much revenue was actually received and the state didn’t pay out on that level of revenue because a large portion of the revenue in the report is not real, or 2) The state did somehow receive such robust revenue but for some reason chose not to pay out revenue sharing at appropriate levels to Maine’s cities and towns while they struggled through the pandemic, even though the state is legally required to do so.
Either of those two scenarios would have demanded answers, as there are serious implications for Maine’s state budget. If lawmakers were to use faulty revenue numbers to avoid making decisions to bring Maine’s state budget into the required balance under the Maine Constitution, the state could kick off a rolling budget crisis into the next budget year and beyond. Maine’s budget year ends June 30, 2020, a little over six weeks from now.
But now, emails acquired by Maine People Before Politics show what is happening, and it is sure to draw criticism from those who expect the revenue report to report revenue, and only revenue.
According to one of the emails published by MPBP, the Mills Administration has told some lawmakers they are including “receivables” or, basically a projection of what they expect the state to receive in the future in the revenue report as if it is the actual revenue received. That explains why revenue sharing transfers declined so much.
A table provided in the email from a state finance official says that more than $264 million in income taxes that is listed as “revenue” in the April revenue report was not received but still reported as revenue. That means the state only collected about $67 million in income tax revenue in the month of April – not the $389 million in total income tax payments they claimed.
Officials used the same tactic, which MPBP has termed a “sleight of hand” both on final individual and corporate income tax payments and on anticipated payments.
One individual, whose name is redacted from an email published by MPBP, wrote to the Director Christopher Nolan from the Office of Fiscal and Program Review saying, “Commissioner Figueroa mentioned receivables in a phone conversation on Friday, but I didn’t get the impression that would show up in a revenue report. Adding receivables in, kind of makes the revenue report a revenue projection.”
Appointed by Governor Janet Mills, Commissioner Kristen Figueroa heads up the Department of Administrative and Financial Services. She is the Commissioner Figueroa referred to by the unnamed individual in the email exchange with Director Nolan.
It appears that Commissioner Figueroa has decided to include projected revenue in the future as if it were revenue the state had received because the state delaying income tax filing and payment deadlines to match federal extensions. That explanation is no excuse for the Mills Administration releasing the report, says MPBP.
“Maine taxpayers deserve the real numbers and bold actions to limit long-term damage to our economy,” stated Julie Rabinowitz, Director of Policy and Communication at MPBP. “Governor Mills delayed calling back the economic and revenue forecasters until June and July, and so will not receive revisions until mid-summer. Yet she has appointed a committee to work on the state’s economic recovery and asked for a preliminary report by July 15. That committee will be working without a revised economic forecast. The Administration’s uncoordinated response to reopening Maine and the state’s economic recovery, coupled with today’s revelation that they are hiding the real numbers, should trouble every Mainer.”
With the refusal of Speaker Sara Gideon and Senate President Troy Jackson to reconvene the legislature, time is running out for the legislature to act on any needed spending adjustments.
“The first step to address any problem is to know what you are facing. In this case, significant losses were expected, and the shutdown was directed at the federal level as well as the state level. There’s no reason to hide the truth from the Maine people. Mainers are tough and understand hardship, and they expect their leaders to face obstacles and overcome them, not hide behind budget gimmicks,” said Mrs. Rabinowitz, acknowledging that some of the shortfall was related to the income tax filing extension.
While concerns are rising about the accuracy of Maine’s books, Governor Janet Mills’ administration is facing criticism on multiple fronts for conducting secret meetings in violation of state public access laws; refusing to release detailed geographic data on COVID-19 infection and testing rates; refusing to provide testing at a southern Maine nursing home and admitting to releasing faulty data on Maine’s unemployment situation.
A group of mayors from some of Maine’s larger cities are now raising questions about Governor Mills’ use of federal dollars which were sent to the state with the purpose of being distributed to their communities. Those funds have not been distributed, even as the state cut revenue sharing transfers to those same communities.
“To date, the city of Auburn has expended roughly $156,000 on federally approved expenses. Without fully understanding your plans for distribution of these funds, we have been very conservative in our application of our finite resources,” says Levesque’s letter. “With guidance from your office, we can do more for our local businesses, first responders, staff and residents in need. Each day that passes is a wasted opportunity to stabilize our city and state.”
But some liberal lawmakers, such as Rep. Drew Gattine, the House Chair of the powerful Appropriations Committee, have been quoted suggesting that lawmakers need to spend more money at the state level, not less. It is unclear how that could happen if revenue is plummeting as most people now understand.
This all paints a dark picture for the state of Maine and the more than 450 Maine municipalities struggling to get by. The clock is ticking as the end of Maine’s budget year is less than seven fleeting weeks away.