Changes longstanding budget-to-actual report to include ‘receivables’ for income and corporate taxes
FOR IMMEDIATE RELEASE: May 18, 2020
MEDIA CONTACT: Julie Rabinowitz, Director of Policy and Communication, 207-292-2722 ext. 102, Julie@mainepbp.com
AUGUSTA—Maine People Before Politics (MPBP) has learned that the Mills Administration is using a projection of income and corporate taxes in the Monthly Revenue Report instead of only the actual revenues received by the state.
Instead of showing a more than $200 million shortfall for all budget lines, the April revenue report shows a $16 million surplus. This is because the numbers the Mills Administration provided to the Legislature’s analysts for what has always been a budget-to-actual report included projected receivables of $264.5 million for April’s final and estimated income and corporate taxes.
“The Monthly Revenue Report has been a critical indicator of what is happening in Maine’s economy as it presents a straightforward budget-to-actual comparison of General Fund revenues,” stated Julie Rabinowitz, director of policy and communication for Maine People Before Politics. “Last month, we called attention to the need to take real actions, such as freezing hiring and cutting spending, in light of the impending budget crisis. Yet not only has Governor Mills not issued a curtailment order or set specific spending reduction targets, her administration is changing their reporting to hide the April shortfall.”
The revenue report issued by the Legislature’s Office of Fiscal and Program Review (OFPR) closely aligns with what is prepared by the Commissioner of Administrative and Financial Services. Emails obtained by MPBP indicate that the DAFS Commissioner Kirsten Figueroa briefed at least some members of the Legislature that there would be some use of receivables in the monthly reporting, but it was unclear that it would be substituted for the revenue in the monthly budget-to-actual report. The spreadsheet issued by OFPR does not make any indication in a footnote or separate table that the budget lines for corporate or income taxes are not actual revenue but instead projections and does not qualify that the surplus or the majority of the income and corporate taxes has not actually arrived in state coffers.
It appears that the Mills Administration wants to use the inaccurate revenue numbers as a placeholder in the monthly reports until July 15, the extended deadline for income tax payments at the state and federal levels. However, that complicates the reporting series as it changes a straightforward budget-to-actual report to a mix of cash and accrual accounting lines, making it hard to determine whether other lines, like revenue sharing, which are based on total receipts, are accurate.
“The easiest way for the Mills Administration and OFPR to demonstrate that the revenue shortfall will be made up to some extent by July 15 was to create a separate, one-time, spreadsheet. Instead, it appears that they are choosing to alter a longstanding report whose format has been used for decades,” Rabinowitz noted.
“Maine taxpayers deserve the real numbers and bold actions to limit long-term damage to our economy.” stated Rabinowitz. “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.”
The financial forecaster Moody’s Investors Service has projected Maine would be one of the ten worst-hit states, even factoring in projected federal Coronavirus aid. Oxford Economics Ranked Maine as the nation’s most vulnerable state due largely to our older population, high share of small businesses and the state’s dependence on tourism.
Both the administration and the House and Senate Chairs of the Appropriations and Financial Affairs Committee have tried to claim in recent statements that the Budget Stabilization Fund (BSF), or rainy day fund, will stand at $257 million at the end of the fiscal year. However, Maine currently has $239 million in that fund, and the extra $17.4 million will only be put in the fund if there is at least that much surplus in the General Fund at the end of the fiscal year.
Due to falling sales tax revenue detailed on the April revenue report, as well as the delay in the receipt of the income and corporate taxes, it is unlikely that the state will have the projected surplus on hand to transfer to the rainy day fund. The Highway Fund also is experiencing significant shortfalls.
Rabinowitz stated, “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.”
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