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Economic Forecasters: Shutdown Uncertainty Threatens Maine's Economy
10/25/2013   Reported By: Mal Leary

Members of the state Consensus Economic Forecasting Committee are saying that uncertainty caused by the partial federal government shutdown, and the threat of another shutdown in a few months, are some of the reasons they are pessimistic about the growth of Maine's economy. As Mal Leary reports, that forecast could result in a downward re-projection of state revenues.

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Last week, members of the economic forecasting group heard from several statewide trade groups, from bankers and realtors to car dealers and manufacturers, about Maine's economy.

On Friday, they discussed the information gleaned from those groups, as well as national and international economic forecasts, and concluded that while Maine's economy is improving, it is not improving as fast as most of the nation. Jim Clair is the chairman of the group.

"Some of the Global Insights and Moody's forecasts in the out years were more aggressive than what we were willing to accept, A," Clair says. "B, second point, is that we are concerned that Maine is going to continue to lag the rest of the nation, and so you saw some specific downsizing to do more of a Maine fit. The Maine economy will grow, albeit slower than most of the rest of the nation."

Overall, Clair says, the group is a little more pessimistic than it was in the spring, when it made its last economic forecast. He says the partial federal government shutdown and the threat that the federal government was going to default on its debt will continue to cause uncertainty in the business community, and that will affect job growth and economic expansion.

"No business person wants uncertainty," he says. "And the fact that interest rates, for example, could spike dramatically because of a default, that there could be people unemployed in a way that wouldn't need our services, are really alarming events."

The forecast will be finalized next week and sent to the state Revenue Forecasting Committee. Mike Allen, the associate commissioner for tax policy at Maine Revenue Services, chairs that panel, and closely watched the economic committee's deliberations. He says the economic forecast could well mean a reduction in projected revenues.

"There are always these other factors that need to be taken into account that may help us offset some of this, or all of this," Allen says. "So we are just going to have and wait and see until we get into doing the actual revenue forecast. But, certainly what happened today should dampen the revenues a little bit."

Allen says some revenues are less affected by the economy than others. He also points out the revenue panel will be reviewing a lot of information that was previously unavailable. For example, he says, the deadline for taxpayers with an extension for filing their 2012 taxes was Oct. 15, and he is just getting that data to analyze.

"If that comes in stronger than we thought, we will be jumping off a higher base," he says. "I mentioned today our estimated payment - the third estimated payment for 2013 - came in way above budget. At some point, if that leads us to believe 2013 is stronger than we thought, there's another bump up."

But Allen also shares the concern of the economic forecasting group about what will happen in Congress when the current short term debt extension runs out in February. He says any major economic disruptions at the national level will certainly have a significant ripple effect on Maine revenues.


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