DEPARTMENT OF ADMINISTRATIVE & FINANCIAL SERVICES 78 STATE HOUSE STATION AUGUSTA, ME 04333-0078 PHONE: 207-624-7800 FAX: 207-624-7804 TDD: 207-287-4537 MEMORANDUM TO: Governor Paul R. LePage Members, Legislative Council Members, Joint Standing Committee on Appropriations and Financial Affairs Members, Joint Standing Committee on Taxation FROM: Richard W. Rosen, Acting Commissioner Department of Administrative & Financial Services DATE: July 30, 2014 SUBJ: Revenues – June ****************************************************************************** June General Fund revenues were over budget by $20.5 million or 4.2%. FY14 General Fund revenues ended the fiscal year $39.1 million over budget (+1.3%). Fiscal year revenues were up 0.6% (+$19.1 million) compared to last fiscal year. Sales & use tax receipts were under budget for the month by $1 million. June was the third straight month that sales tax revenue fell short of budget. June revenues (May sales) continue to reflect slow income growth for low and middle income households and rising energy prices from unrest in the Middle East. Continued poor weather is likely another contributing factor. May taxable sales increased by 2.5% compared to a year ago, but were below the 3.5% growth target set by the Revenue Forecasting Committee. Restaurants and business operating sales posted solid gains in May; up 5.5% and 4.2%, respectively. Building supply store sales increased by 2.8% compared to May of last year, and auto/transportation sales increased by 3.2%. Consumer activity is expected to pick up during summer as warmer weather encourages outdoor activity. A voluntary audit payment in excess of $1 million resulted in the service provider tax being over budget for the month and year. Individual income taxes were over budget in June by $6.3 million and for the fiscal year by $25.4 million. Most of the monthly surplus was the result of stronger than projected withholding that offset much of the deficit recorded in May. Withholding, which represents the largest source of annual General Fund revenue, ended the fiscal year under budget by $2.3 million, a negative variance of 0.18%. The bulk of the year-end surplus was from 1040 refunds being under budget by $27.3 million. The Office of Tax Policy estimates that approximately half of the refund variance is from the Property Tax Fairness Credit and the other half from stronger than projected 2013 income growth. With most of the 2013 tax year returns now processed it appears that the final cost of the new Property Tax Fairness Credit will be $9-$12 million below estimate. Taxpayers have up to three years to amend their 2013 return if they have not already applied for the credit. Corporate income tax receipts had a very strong June, ending the month $9.1 million over budget. For the fiscal year corporate income tax was over budget by $13.2 million or 7.8%, an increase of 6.4% over FY13. The second tax year 2014 estimated payment was due in June for calendar year filers. June estimated payments exceeded budget by $5.4 million and increased 9% over last June. Short term trends in corporate income tax revenues are difficult to understand or project forward, however if the recent strength in corporate receipts continues it may help offset shortfalls in other revenue lines during the first-half of FY15. Sales & Use Taxes Revenue was $966,370 under budget for the month and $1.2 million (-0.1%) under budget fiscal year-to-date. Fiscal year-to-date revenue was $119.4 million (+12.1%) over fiscal year 2013. Taxable Sales Total taxable sales for the month of May (June revenue) were 2.5% over May 2013. The annual rate of change excluding utilities was 3.8%. Building supply sales were up 2.8% for the month and 4.9% for the year ending in May. Sales of taxable items in food stores were up 1.9% for the month and 2.5% for the year. General merchandise sales (primarily sales of goods sold in large department and discount stores) were up 0.4% for the month and down 0.2% for the year. Sales in other retail stores such as jewelry, drug, sporting goods, book, antique, pet, photo, toy, and craft stores were up 1.8% for the month and 2.2% for the year. Auto/transportation sector sales were up 3.2% for the month and 7.0% for the year. Sales of meals and other prepared foods were up 5.5% for the month and 3.4% for the year. Lodging sales were up 1.1% for the month and 5.2% for the year. Business operating sales (primarily use tax paid by businesses) were up 4.2% for the month and 5.3% for the year. Service Provider Tax Revenue was $1.2 million over budget for the month and $855,961 (+1.7%) over budget fiscal year-to-date. Individual Income Tax Revenue was $6.3 million over budget for the month and $25.4 million (+1.8%) over budget fiscal year-to-date. Fiscal year-to-date withholding payments were 0.1% under fiscal year 2013. Estimated payments were down 5.2% and final payments were down 14.5% fiscal year-to-date. Fiscal year-to-date revenue was $115.7 million (-7.6%) under fiscal year 2013. 2 Corporate Income Tax Revenue was $9.1 million over budget for the month and $13.2 million (+7.8%) over budget fiscal year-to-date. Estimated payments were up 3.7% and final payments were down 11.7% fiscal year-to-date. Fiscal year-to-date revenue was $10.9 million (+6.4%) over fiscal year 2013. Cigarette & Tobacco Taxes Cigarette and tobacco products tax revenue was $546,392 under budget for the month and $259,833 (+0.2%) over budget fiscal year-to-date. Insurance Companies Taxes The Insurance Companies Taxes were $861,419 over budget for the month and $2.5 million over budget fiscal year-to-date. Estate Tax The estate tax was $2.5 million under budget for the month and $3.6 million under budget fiscal year-to-date. Transfers for Tax Relief Programs Refunds for the Business Equipment Tax Reimbursement (BETR) and Business Equipment Tax Exemption (BETE) were slightly over budget in June by $0.128 million. The tax relief programs ended the fiscal year over budget by $3.1 million (+5.0%). Municipal Revenue Sharing Revenue sharing was under budget in June by $1.1 million and over budget for the fiscal year by $1.2 million. Lottery Lottery Revenues were over budget for the month by $0.5 million. For the fiscal year lottery receipts were $1.7 million under budget. Other Revenues Other Revenues were over budget for the month by $5.2million. Other revenues ended the fiscal year over budget by $6.0 million. Highway Fund Motor fuel tax receipts were over budget in June by $1.2 million. The Highway Fund as a whole was over budget for the month by $1.9 million. Fuel taxes finished FY14 $5.7 million over budget. Compared to last fiscal year motor fuel excise tax receipts increased by 1.4%. 3 National Economy The third release of first quarter GDP growth by the Bureau of Economic Analysis (BEA) shows the US economy contracted by 2.9%. This revision was the largest since 2002 and the drop in economic activity was the largest since the recession deepened in the final quarter of 2008. While bad weather and a correction in inventories are the key factors driving the overall contraction, revisions to healthcare consumption and net exports accounted for most of the change in GDP growth between the second and third releases. In the case of healthcare the original estimates assumed strong first quarter growth based on assumptions that expanded Medicaid and insurance exchange enrollments because of the Affordable Care Act would increase healthcare spending. Actual data on service spending showed real healthcare consumption actually fell in the first quarter of 2014. Economists expect the first quarter GDP figures to be revised again when BEA releases their initial estimate of second quarter GDP and annual revisions going back to 1999. Future first quarter revisions will likely show that the economy was stronger than currently estimated, but still weaker than many economists projected at the start of the year. Maine Economy Similar to national trends, low and middle income Maine households continue to experience moderate income growth. In addition, Maine family budgets are being stretched by rising energy and food prices, preventing them from making more discretionary purchases. Year-over-year taxable sales growth has been weak in recent months and will remain challenged as growth during the summer and early fall last year was very strong. One factor that will help counter these trends is the improvement in private sector job creation. The latest unemployment report from the Maine Department of Labor (DOL) estimates that private sector nonfarm payroll jobs in June were up 8,000 from one year ago. As the unemployment rate continues to fall (5.7% in June) the labor market will tighten and eventually start the process of more beneficial wage growth for Maine workers. RWR:mja Attachments cc: John McGough Jonathan Nass Grant Pennoyer Maureen Dawson Marc Cyr David Boulter Amanda Rector Jim Breece Jerome Gerard Melissa Gott 4 STATE OF MAINE EXHIBIT I Undedicated Revenues - General Fund For the Twelfth Month Ended June 30, 2014 For the Fiscal Year Ending June 30, 2014 Comparison to Budget Month Year to Date Variance Over/(Under) Percent Over/(Under) Total Budgeted Fiscal Year Ending 6-30-2014 207,072,651 208,039,021 1,106,158,236 1,107,378,483 9,956,385 8,760,378 1,196,007 13.7% 50,173,388 49,317,427 855,961 1.7% 49,317,427 Individual Income Tax 181,395,784 175,130,169 6,265,615 3.6% 1,406,117,705 1,380,685,000 25,432,705 1.8% 1,380,685,000 Corporate Income Tax 39,626,367 30,500,000 9,126,367 29.9% 182,928,181 169,706,958 13,221,223 7.8% 169,706,958 Cigarette and Tobacco Tax 12,188,231 12,734,623 (4.3%) 136,159,833 135,900,000 259,833 0.2% 135,900,000 Insurance Companies Tax Service Provider Tax (966,370) (546,392) 26,336,639 25,475,220 Estate Tax 5,329,681 7,830,236 Fines, Forfeits & Penalties 2,281,706 2,006,214 117,848 11,501 4,654,743 4,115,380 539,363 Income from Investments Transfer from Lottery Commission Transfers for Tax Relief Programs 861,419 (0.5%) 1,107,378,483 83,203,879 80,715,000 2,488,879 3.1% 80,715,000 23,961,911 27,553,982 (3,592,071) (13.0%) 27,553,982 275,492 13.7% 23,473,506 23,468,666 4,840 0.0% 23,468,666 106,347 924.7% 301,144 132,523 168,621 127.2% 13.1% 51,845,477 53,500,000 (127,948) (278) (9,344,618) (127,670) Other Taxes and Fees 12,936,320 13,003,969 Other Revenues 14,893,819 9,701,533 5,192,286 53.5% 508,433,910 487,963,348 20,470,562 4.2% 1,116,301 (67,649) (45924.4%) (1,654,523) (3.1%) 132,523 53,500,000 (65,357,986) (62,258,370) (3,099,616) (5.0%) (62,258,370) 11.9% (66,063,110) (64,839,710) (1,223,400) (1.9%) (64,839,710) (0.5%) 130,140,462 128,659,912 1,480,550 1.2% 128,659,912 50,454,306 44,447,248 6,007,058 13.5% 44,447,248 3,113,496,933 3,074,367,119 39,129,814 1.3% 3,074,367,119 (1) Included in the above is $8,228,317 for the month and $66,063,110 year-to-date, that was set aside for Revenue Sharing with cities and towns. (2) Figures reflect estimates of the Maine State Revenue Forecasting Committee approved in March 2014, updated by PL 2013 c. 502 and c. 564. (3) This report has been prepared from preliminary month end figures and is subject to change. (0.1%) 3.4% (8,228,317) NOTES: (1,220,247) (31.9%) (2,500,555) Transfer to Municipal Revenue Sharing Total Collected Budget Percent Over/(Under) Budget Sales and Use Tax Actual Variance Over/(Under) Actual STATE OF MAINE EXHIBIT II Undedicated Revenues - General Fund For the Twelfth Month Ended June 30, 2014 For the Fiscal Years Ending June 30, 2014 and 2013 Comparison to Prior Year Month Year to Date Variance Over/(Under) Percent Over/(Under) Prior Year Variance Over/(Under) 1,106,158,236 986,747,637 119,410,599 50,173,388 50,139,878 33,510 1,406,117,705 1,521,862,756 12.7% 182,928,181 171,987,073 10,941,108 (0.9%) 136,159,833 137,951,824 (1,791,991) Current Year Prior Year 207,072,651 182,161,137 24,911,514 13.7% 9,956,385 8,365,658 1,590,727 19.0% Individual Income Tax 181,395,784 174,365,208 7,030,576 4.0% Corporate Income Tax 39,626,367 35,169,072 4,457,295 Cigarette and Tobacco Tax 12,188,231 12,304,126 Insurance Companies Tax Sales and Use Tax Service Provider Tax (115,895) Current Year (115,745,051) Percent Over/(Under) 12.1% 0.1% (7.6%) 6.4% (1.3%) 26,336,639 24,985,566 1,351,073 5.4% 83,203,879 79,609,419 3,594,460 4.5% Estate Tax 5,329,681 33,234,039 (27,904,358) (84.0%) 23,961,911 79,083,058 (55,121,147) (69.7%) Fines, Forfeits & Penalties 2,281,706 2,104,573 177,133 8.4% 23,473,506 23,748,503 (274,997) 117,848 73,802 44,046 59.7% 301,144 148,434 4,654,743 3,946,501 Income from Investments Transfer from Lottery Commission 152,710 (1.2%) 102.9% 708,242 17.9% 51,845,477 52,908,602 (1,063,124) (127,948) (872,071) 744,123 85.3% (65,357,986) (111,674,333) 46,316,347 41.5% Transfer to Municipal Revenue Sharing (8,228,317) (10,402,586) 2,174,269 20.9% (66,063,110) (95,974,153) 29,911,044 31.2% Other Taxes and Fees 12,936,320 16,303,339 (3,367,020) (20.7%) 130,140,462 153,796,137 (23,655,675) (15.4%) Other Revenues 14,893,819 14,039,289 854,530 6.1% 50,454,306 44,049,007 6,405,299 14.5% 508,433,910 495,777,655 12,656,256 2.6% 3,113,496,933 3,094,383,842 19,113,091 0.6% Transfers for Tax Relief Programs Total Collected (2.0%) STATE OF MAINE EXHIBIT III Undedicated Revenues - General Fund For the Twelfth Month Ended June 30, 2014 For the Fiscal Year Ending June 30, 2014 Comparison to Budget Month Actual Year to Date Variance Over/(Under) Budget Percent Over/(Under) Actual Variance Over/(Under) Budget Percent Over/(Under) Total Budgeted Fiscal Year Ending 6-30-2014 Detail of Other Taxes & Fees 2,412,245 3,400,155 (987,910) (29.1%) 25,847,953 26,687,214 22,154 22,446 (292) (1.3%) 262,375 257,633 4,742 1.8% 257,633 0400s Alcohol Excise Tax 1,495,029 1,515,018 (19,989) (1.3%) 17,923,029 17,464,997 458,032 2.6% 17,464,997 0700s Corporation Taxes 23.2% 9,294,995 8,313,649 11.8% 8,313,649 6,842,823 8,000,000 0100s All Others 0300s Aeronautical Gas Tax (839,261) 26,687,214 2,072,541 1,682,352 390,189 0800s Public Utilities - - - 1000s Banking Taxes 2,226,400 2,028,742 197,658 9.7% 27,199,530 25,351,990 1,847,540 7.3% 25,351,990 391,315 341,306 50,009 14.7% 5,393,102 4,897,840 495,262 10.1% 4,897,840 - - - - - - 1300s Harness Racing Pari-mutuel 660,091 746,657 (86,566) 8,671,238 9,233,964 (562,726) 1400s Business Taxes 967,958 932,065 35,893 3.9% 7,991,022 7,528,842 462,180 1500s Motor Vehicle Licenses 447,899 452,386 (4,487) (1.0%) 4,329,249 4,411,202 (81,953) (1.9%) 4,411,202 2,207,771 1,860,559 15,987,534 16,101,822 (114,288) (0.7%) 16,101,822 (13,146) (3.2%) 1100s Alcoholic Beverages 1200s Amusements Tax 1700s Inland Fisheries & Wildlife 1900s Other Licenses - (11.6%) 347,212 18.7% 10,636 47.7% 981,346 (3.1%) (1,157,177) (14.5%) - 8,000,000 - (6.1%) 9,233,964 6.1% 7,528,842 32,919 22,283 397,613 410,759 12,936,320 13,003,969 (67,649) (0.5%) 130,140,462 128,659,912 1,480,550 1.2% 128,659,912 2200s Federal Revenues 11,470 29,502 (18,032) (61.1%) 415,914 405,000 10,914 2.7% 405,000 2300s County Revenues - - - - - - 69,003 22,713 46,290 273,846 272,545 1,301 Total Other Taxes & Fees 410,759 Detail of Other Revenues 2400s Revenues from Cities and Towns 2500s Revenues from Private Sources 2600s Current Service Charges 2700s Transfers from Other Funds 2800s Sales of Property & Equipment Total Other Revenues NOTE: 203.8% 0.5% 272,545 163,826 173,993 (10,167) (5.8%) 11,688,187 11,699,146 (10,959) (0.1%) 11,699,146 2,520,694 1,829,177 691,517 37.8% 26,629,099 25,899,633 729,466 2.8% 25,899,633 12,109,298 7,604,910 4,504,388 59.2% 11,306,555 6,046,424 5,260,131 87.0% 6,046,424 19,528 41,238 140,707 124,500 16,207 13.0% 124,500 14,893,819 9,701,533 50,454,306 44,447,248 6,007,058 13.5% 44,447,248 This report has been prepared from preliminary month end figures and is subject to change (21,710) 5,192,286 (52.6%) 53.5% STATE OF MAINE EXHIBIT IV Undedicated Revenues - General Fund For the Twelfth Month Ended June 30, 2014 For the Fiscal Years Ending June 30, 2014 and 2013 Comparison to Prior Year Month Current Year Year to Date Variance Over/(Under) Prior Year Percent Over/(Under) Current Year Variance Over/(Under) Prior Year Percent Over/(Under) Detail of Other Taxes & Fees 2,412,245 5,514,986 (3,102,741) (56.3%) 25,847,953 28,037,514 22,154 22,217 (64) (0.3%) 262,375 259,685 2,690 1.0% 0400s Alcohol Excise Tax 1,495,029 1,650,286 (155,257) (9.4%) 17,923,029 17,517,642 405,387 2.3% 0700s Corporation Taxes 2,072,541 2,052,133 20,408 9,294,995 8,933,147 361,848 0800s Public Utilities - - - 6,842,823 10,076,113 (3,233,290) 1000s Banking Taxes 2,226,400 1,905,800 27,199,530 25,070,880 2,128,650 8.5% 391,315 518,323 5,393,102 5,377,180 15,922 0.3% - - - - - 1300s Harness Racing Pari-mutuel 660,091 1,089,670 (429,580) (39.4%) 8,671,238 13,694,200 (5,022,962) (36.7%) 1400s Business Taxes 967,958 1,074,415 (106,457) (9.9%) 7,991,022 9,984,081 (1,993,059) (20.0%) 1500s Motor Vehicle Licenses 447,899 442,800 5,099 1.2% 4,329,249 4,254,936 2,207,771 1,998,399 209,371 10.5% 15,987,534 0100s All Others 0300s Aeronautical Gas Tax 1100s Alcoholic Beverages 1200s Amusements Tax 1700s Inland Fisheries & Wildlife 1.0% - 320,600 16.8% (127,008) (24.5%) - - (2,189,561) (7.8%) 4.1% (32.1%) - 74,313 1.7% 16,078,543 (91,010) (0.6%) 32,919 34,309 (1,391) (4.1%) 397,613 14,512,215 (14,114,602) (97.3%) 12,936,320 16,303,339 (3,367,020) (20.7%) 130,140,462 153,796,137 (23,655,675) (15.4%) 2200s Federal Revenues 11,470 49,292 (37,822) (76.7%) 415,914 413,967 1,947 2300s County Revenues - - - - - - 69,003 62,829 6,174 273,846 247,608 26,238 10.6% 14.9% 1900s Other Licenses Total Other Taxes & Fees Detail of Other Revenues 2400s Revenues from Cities and Towns 2500s Revenues from Private Sources 2600s Current Service Charges 2700s Transfers from Other Funds 2800s Sales of Property & Equipment Total Other Revenues NOTE: 9.8% 163,826 170,075 (6,250) (3.7%) 11,688,187 10,174,658 1,513,528 2,520,694 4,776,053 (2,255,359) (47.2%) 26,629,099 28,728,337 (2,099,239) 12,109,298 8,961,728 3,147,571 35.1% 11,306,555 4,368,006 0.5% - (7.3%) 6,938,549 158.8% 19,528 19,312 215 1.1% 140,707 116,431 24,276 20.9% 14,893,819 14,039,289 854,530 6.1% 50,454,306 44,049,007 6,405,299 14.5% This report has been prepared from preliminary month end figures and is subject to change STATE OF MAINE EXHIBIT V Undedicated Revenues - Highway Fund For the Twelveth Month Ended June 30, 2014 For the Fiscal Year Ending June 30, 2014 Comparison to Budget Month Actual Budget Year to Date Variance Over/(Under) Percent Over/(Under) Actual Budget Variance Over/(Under) Percent Over/(Under) Total Budgeted Fiscal Year Ending 6-30-2014 39,371,019 38,184,650 1,186,369 3.1% 217,494,739 211,814,977 5,679,762 2.7% 211,814,977 5,097,270 4,894,593 202,677 4.1% 84,815,991 84,095,120 720,871 0.9% 84,095,120 Motor Vehicle Inspection Fees 440,541 50,050 390,491 780.2% 3,109,258 2,982,500 126,758 4.3% 2,982,500 Miscellaneous Taxes & Fees 183,421 149,849 33,572 22.4% 1,307,949 1,298,729 9,220 0.7% 1,298,729 Fines, Forfeits & Penalties 88,456 86,025 2,431 2.8% 976,084 1,007,998 (31,914) (3.2%) 1,007,998 Earnings on Investments 18,080 7,419 10,661 143.7% 80,299 52,553 27,746 52.8% 52,553 591,162 536,896 54,266 10.1% 9,292,645 9,015,334 277,311 3.1% 9,015,334 45,789,948 43,909,482 1,880,466 4.3% 317,076,964 310,267,211 6,809,753 2.2% 310,267,211 Fuel Taxes Motor Vehicle Registration & Fees All Other Total Collected NOTE: This report has been prepared from preliminary month end figures and is subject to change. STATE OF MAINE EXHIBIT VI Undedicated Revenues - Highway Fund For the Twelveth Month Ended June 30, 2014 For the Fiscal Years Ending June 30, 2014 and 2013 Comparison to Prior Year Month Current Year Prior Year Year to Date Variance Over/(Under) Percent Over/(Under) Current Year Prior Year Variance Over/(Under) Percent Over/(Under) 39,371,019 39,199,683 171,336 0.4% 217,494,739 214,539,829 2,954,909 1.4% 5,097,270 4,961,529 135,740 2.7% 84,815,991 89,333,202 (4,517,210) (5.1%) Motor Vehicle Inspection Fees 440,541 327,496 113,045 34.5% 3,109,258 3,495,704 (386,446) (11.1%) Miscellaneous Taxes & Fees 183,421 192,297 (4.6%) 1,307,949 1,309,810 (1,862) (0.1%) Fines, Forfeits & Penalties 88,456 87,802 976,084 1,030,267 (54,183) (5.3%) Earnings on Investments 18,080 22,468 (4,387) (19.5%) 80,299 105,414 (25,115) (23.8%) 591,162 762,019 (170,857) (22.4%) 45,789,948 45,553,293 Fuel Taxes Motor Vehicle Registration & Fees All Other Total Collected NOTE: This report has been prepared from preliminary month end figures and is subject to change. (8,876) 654 236,655 0.7% 0.5% 9,292,645 9,011,474 317,076,964 318,825,700 281,170 (1,748,736) 3.1% (0.5%) Maine Revenue Services Taxable Sales by Sector In Thousands of Dollars May '14 Building Supply Food Store General Merchandise Other Retail Auto/Transportation Restaurant Lodging Consumer Sales Business Operating Total Utilities Total plus Utilities $214,469.0 $137,437.7 $253,040.7 $174,163.5 $382,821.6 $193,250.2 $51,424.0 $1,406,606.7 $173,260.7 $1,579,867.4 $102,955.7 $1,682,823.1 % Ch. 2.8% 1.9% 0.4% 1.8% 3.2% 5.5% 1.1% 2.5% 4.2% 2.7% -0.4% 2.5% May '13 % Ch. $208,638.1 8.2% $134,939.4 -0.1% $252,089.5 7.7% $171,021.7 4.4% $371,005.7 11.9% $183,170.0 5.8% $50,854.3 6.0% $1,371,718.7 7.3% $166,314.4 1.6% $1,538,033.1 6.6% $103,356.4 1.9% $1,641,389.5 6.3% May '12 $192,837.3 $135,046.6 $234,108.4 $163,760.0 $331,693.3 $173,182.2 $47,969.0 $1,278,596.8 $163,689.7 $1,442,286.5 $101,433.9 $1,543,720.4 Average Last 3 Mos. Vs. Last Yr. % Change -2.2% 2.0% -0.6% -0.5% 4.2% 2.7% 4.0% 1.3% 3.8% 1.6% Moving Total Last 12 Mos. Vs. Prior % Change 4.9% 2.5% -0.2% 2.2% 7.0% 3.4% 5.2% 3.6% 5.3% 3.8% YTD Growth CY'14 vs. '13 Thru. May % Change -1.0% 2.8% -1.4% 0.2% 4.4% 3.0% 5.4% 1.7% 5.7% 2.2%