🔒Budgets and breaks

State revenues still in red

• Sales tax up slightly

• Penalty revenue nearly 20% below projections

State revenues were in the black for November, $2.5 million above estimates. But they are still in the red for the first four months of the budget year by $4.2 million.

Finance Commissioner Sawin Millett said the new revenue projections that take effect for December will increase the red ink by another $10 million when December revenues are reported. He said the slow economic recovery will make it difficult to make up the $14.2 million shortfall in a single month.

Millett said while the sales tax is above estimates for the month and for the year, it is up by just 2.3% so far this budget year.

"We will be watching that one very closely," he said. "What we have been seeing nationally is that there was a good bump up around Black Friday in November, but since then, sales have been slower than what was expected."

Sen. Richard Rosen, R-Bucksport, the co-chairman of the appropriations committee agrees that sales have not been as strong as hoped. He owns a retail store and said sales there have followed that same pattern. He noted reports that online sales are recording significant increases.

"I think all states are going to have to look at how they collect sales taxes and see if they can get some of the tax owed from those online sales that is not being collected," he said.

Rosen said it appears the economy is continuing to "bounce along the bottom" and has yet to start a period of continued growth. He said it is important to note that the corporate income tax is continuing to come in above estimates and that the personal income tax is meeting estimates.

One area that continues to significantly fall below estimates is revenue from fines and penalties. Over the year, it is supposed to bring in over $28 million, but it is 19.7% below projections so far this year. Millett believes in this economy, paying fines is very difficult for some Mainers.

Battle over tax breaks brewing

• Budget bills expected by late January

• Business breaks to be scrutinized

Lawmakers are eyeing business tax breaks among other state spending to close an estimated $221 million Medicaid budget problem.

Rep. Pat Flood, R-Winthrop, the House co-chairman of the panel, said business tax policies are regularly reviewed by the taxation committee and that is the forum for considering tax policy.

Finance Commissioner Sawin Millett has told the panel there will be at least two more budget bills for the Legislature to consider. One is the measure to implement the $25 million in cuts found by the budget streamlining task force that he chaired, and a second for the growing list of non-Medicaid budget problems facing the state.

"That should be ready by mid-to-late January," he said in an interview. He said it would be the "traditional" supplemental budget that addresses such items as fuel costs to heat state buildings and other budget shortfalls across all state agencies. It also will address non-Medicaid budget needs at DHHS like a shortfall in general assistance.

Sen. Dawn Hill, D-York, the only Democrat senator on the panel, said unlike House Democrats, Senate Democrats have yet to caucus on the budget proposal. She said there are several options in dealing with the budget, including limiting the Medicaid fix to the remaining months of this fiscal year and considering the second budget year of Medicaid needs along with all the other budget demands.

"That discussion can lead to uncertainty that then leads to businesses deciding to place their investments elsewhere where they believe the climate is more certain and more dependable," said Sen. Chris Rector, R-Thomaston, the co-chair of the Legislature's Labor, Commerce and Economic Development Committee. He said the committee has looked at tax policies and determined that many have created jobs, including the Pine Tree Zone program started by then Gov. John Baldacci, a Democrat.

State officials brace for next gambling controversy

• Justice Department lifts ban on state-backed Internet gaming

• Huge implications expected for Maine

Late last month the U.S. Justice Department reversed its interpretation of the 1961 Wire Act that banned online gambling and said state lotteries are not prohibited from offering online wagering, adding another gambling issue for the second session of the Legislature.

"We are reviewing that opinion and its impact on Internet lottery here in Maine," said Tim Poulin, acting director of the Maine State Lottery. "I think it's fair to say that we have no immediate plans here at the Lottery to offer any Internet-based lottery sales."

He said there are broad implications to the ruling, and the basic way the state lottery operates could change. Maine now sells both instant lottery tickets and online games through retailers at 1,300 locations across the state and the ruling would allow sales directly through a website.

The Justice Department response was the result of questions posed by New York and Illinois lottery authorities questioning the broad interpretation of the law. The Justice Department concluded past interpretations were wrong, and that the federal statute specifically outlaws wagering on sports over the Internet, not other forms of gambling.

Worldwide online gambling is estimated at $30 billion with estimates that online poker games could generate $6 billion a year in the United States. Both New York and Illinois are considering adding online gambling to current state lottery offerings as a way to boost state revenues.

Sen. Nichi Farnham, R-Bangor, is the co-chair of the Veterans and Legal Affairs Committee, which has jurisdiction over gambling issues. She said Internet gambling will be added to the panel's agenda.

"We are always playing catch-up on these issues," she said. "I would like to get ahead of this one, to get out in front."

Farnham said Nevada regulators have already adopted rules to regulate in-state online gambling. She said it's important Maine consider how it wants to react to the new opportunity.

Rep. Mike Carey, D-Lewiston, said he is pleased Farnham wants the committee to quickly address the issue.

"It has implications potentially for state revenues, but also for existing lottery revenues and revenues that nonprofits across the state count on from poker and other games of chance," he said.

Carey said lawmakers will need to consider what other states as they set Maine's policy or the state could face a loss of revenue at a time when every dollar is needed.