As the Director of Econometric Research for Maine Revenue Services, Michael Allen has been preparing for greatly diminished tax collections, the result of a tepid economy that got worse when this summer's miserable weather produced a less-than-robust tourist season.
Since the beginning of the fiscal year on July 1, Allen says state revenues are below projections by a little more than $14 million dollars -- and $3.4 million of that deficit was racked up in August alone.
But, Allen says that figure would have been off by another $2 to $3 million, if not for an unexpected boost in car sales. "I think it's clear at this point that Cash for Clunkers had a significant effect on July revenues."
The August revenues from the Cash for Clunkers program are based on July sales and those numbers are expected to sweeten September's revenue report, since the program continued into the first part of August. Although the precise numbers are still being tabulated, Allen says the program's impact on what had been projected for July sales will be huge.
"We estimate, based on information that the U.S. Department of Transportation has released -- state-by-state information -- on Cash for Clunkers, that we may have seen as much as a 50 percent increase on what we would have expected."
"Jury's out on that one, but I think our concern is that it may have been a one-time pull-forward of sales tax," says state Sen. Richard Rosen, a Bucksport Republican. Rosen was one of several lawmakers on the Legislature's Appropriations Committee who question whether the car sale tax collections are a fluke or a indicator of things to come.
"So we've got to be very careful from a budgeting point of view that we may be experiencing a temporary boost in sales tax collections related to vehicle sales, and then perhaps see it go back to the recessionary level in the fall and winter," Rosen says.
State Rep. Emily Cain, an Orono Democrat, had a different perspective. "I think the Cash for Clunkers Program has been a help to us. It's been somewhat of a more stabilizing force then maybe we would have had otherwise, so I'm glad for that. I don't think any of us in Approrpriations is thinking that the silver bullet has arrived."
While not a silver bullet, there was a silver lining of sorts in a report from State Treasurer David Lemoine who told the lawmakers that falling interest rates on so-called tax anticipation notes -- money the state sometimes has to borrow to pay bills -- were expected to save the state $9.3 million over the next two years.
As the Appropriations Committee attempts to find an additional $30 million to balance state booksint he second half of the current budget cycle, Rosen questions whether Lemoine's savings can be used. "I don't think it seriously fulfills our charge of acting as this efficiency commission in coming up with the $30 million. That job really is a job to generate ongoing structural changes to government."
Rosen suspects that using half of the treasurer's windfall to help close the $30 million budget hole would really amount to a one-time savings, but Rep. Emily Cain and others on the panel say it's possible the money could be used for that purpose.