2011-11-22 / Maine

Impact of U.S. deficit cuts unknown in Maine

BY GLENN ADAMS The Associated Press


With a possibility of $1 trillion in across-the-board federal spending cuts looming on the horizon, a revenue official in Maine said Monday it’s much too early to say what ripple effects those deficitreduction efforts would have in the state that’s facing its own economic challenges.

“Probably a thousand different scenarios” could evolve, Michael Allen, director of research at Maine Revenue Services, told lawmakers. Most economic forecasts look ahead six months to a year, and federal cuts that could have an impact on states’ budgets are at least a year off.

The issue came up as Maine’s Appropriations Committee got an update on state revenues amid a stubbornly slow economy.

At the same time in Washington, the deficit-reduction supercommittee’s failure to cut $1.2 trillion in federal red ink set the stage for about $1 trillion in automatic acrossthe board spending cuts to domestic programs and the Pentagon budget beginning in 2013.

“As far as the cuts that are scheduled to automatically go into effect if the supercommittee doesn’t do anything, my hunch is most of these forecasters have kind of punted on that for now,” Allen told the Appropriations Committee. “ They’re not going to occur for another year, so I’m sure they’re just waiting to see what will come out of the committee and what will happen over the course of the next year.”

Four months into Maine’s fiscal year, which started July 1, revenues were less than 1 percent below estimates in the roughly $ 6 billion twoyear state budget, according to the state finance department.

“While the risk of a recession has diminished in recent months, the European debt crisis and the deliberations in Washington on solving the U.S. budget deficit continue to threaten the struggling economy,” the finance department says in its monthly revenue report.

It also says Maine’s economy appears to have stabilized in recent months, although a rise in energy prices remains “ an emerging threat” in a state where homeowners are highly dependent on heating oil to keep warm in the winter.

Meanwhile, a bipartisan task force looking to find $25 million in savings to balance the state budget for the coming fiscal year has reached its goal and is looking for more savings, its chairman, Sawin Millett, told lawmakers.

“ Generally speaking, we have met our minimum target and hopefully will be able to go beyond it,” said Millett, the state finance commissioner. “ It’s been a blast,” he added, drawing a laughs from a few committee members.

The task force will make its recommendations by Dec. 15, with the Legislature having the final say.

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