Spending on hotels, restaurants and fuel in Maine was, not surprisingly, “hard hit” during the summer of COVID-19, but sales figures were not as bleak as anticipated, a state budget official told lawmakers on Wednesday.
Taxable sales for lodging and accommodations in July 2020 were down nearly $100 million – or roughly 40 percent – compared to the previous year, while restaurant sales fell another $105 million or 30 percent. But state revenue forecasters had expected lodging sales to be down 57 percent from last year as the coronavirus pandemic severely limited tourist visits to Maine.
Taxable sales at “general merchandise stores” were down 3.7 percent in July 2020 from taxable spending in July 2019. Yet Mainers were spending big online during the crisis and at other retailers such as sporting goods, pet and craft stores, which all were up 43 percent. Building supply stores also saw sales increase of 13.9 percent over last July.
The net result was that Maine ended August $34 million over budget, said Michael Allen, associate commissioner for tax policy at the Maine Department of Administrative and Financial Services. Individual income tax revenues decreased about $32 million from last July, in part due to changes in the timing of when revenues came to the state, Allen said.
“Not great, but certainly given the economic conditions and the pandemic and all that we’ve been through, revenues are holding up pretty well,” Allen told members of the Legislature’s Appropriations and Financial Affairs Committee.
Allen and members of the state’s Revenue Forecasting Committee and the Economic Consensus Commission are expected to dive deeper into those numbers and what they mean for future months/years on Thursday.
In his preview to lawmakers, Allen said he and his budgeting counterparts in other states have been pleasantly surprised that the summer season was not as bad as expected. Two of the biggest factors, Allen said, are believed to be the $1,200 stimulus check sent to most adults as well as the $600-per-week additional unemployment benefits.
“While a lot of it was being saved, a lot of it was also being spent as well, and that has helped keep sales up,” Allen said.
Those enhanced unemployment benefits have since fallen from $600 to $300 per week in Maine. And as the calendar ticks ever closer to Election Day, prospects dim for another COVID-related relief bill emerging from Congress.
But Allen said he expects to end the fiscal quarter on Sept. 30 “in the black” compared to how much revenue the state expected to take in.
“We are over budget year-to-date and we have six more days to go,” Allen said. “I think the first quarter of the fiscal year has gone better than we anticipated. When we met at the end of the July … we assumed that lodging sales would improve but they would still be down closer to 50 or 60 percent in August, and it is clear now that it did better.”
That’s not to say that Maine’s state tax coffers – as well as the bottom lines of thousands of tourism-dependent businesses – are not still being severely hurt by the pandemic.
While Maine still has among the nation’s lowest coronavirus infection and death rates, the state’s unemployment rate was 6.9 percent last month and there were 55,000 fewer jobs than in February. Numerous outbreaks in York County, particularly in the Sanford area, also have sparked concerns that Maine could quickly lose ground against the virus at a time when schools are reopening and Mainers are forced back inside by colder weather.
The administration of Gov. Janet Mills also has proposed a state hiring freeze and delayed technology upgrades, among other cuts, to cover what was projected to be a $520 million hole in the current budget.
Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services, told lawmakers on Wednesday that the Mills administration had committed nearly $950 million of the $1.25 billion in federal CARES Act funding provided to the state by Congress.
Just shy of $270 million of the federal funding went to shore up the state’s unemployment insurance trust fund to help keep the fund solvent and avoid steep increases in employer contribution obligations in the future. Another $200 million is earmarked for a grant program aimed at maintaining the viability of businesses and nonprofit organizations struggling during the pandemic.
Of the remaining $306 million in CARES Act funding, the Mills administration announced plans Wednesday to provide $164 million to schools to help implement health and safety protocols. Additionally, Mills announced an additional $10 million for a rental relief program.
Figueroa said there is lots of demand for the remaining funds, but suggested some of the money could be earmarked for COVID-19 testing programs in college campuses and K-12 settings.
“We have also been clear to say there is not enough money for all of the need,” Figueroa said.
The Maine Department of Health and Human Services is also struggling to meet demands for services and from service-providers during the pandemic.
Earlier this year, DHHS increased the reimbursement rate for workers who help care for Mainers with intellectual or developmental disabilities, whether at home or in group settings. Previously, reimbursement rates were below Maine’s $12-an-hour minimum wage, a disparity that worsened recruitment and retention for jobs that carry even higher risks of COVID-19 exposure.
But that temporary pay boost expired this summer, and service provider organizations have warned that they may be forced to reduce services or close altogether.
DHHS is completing a “comprehensive” reimbursement rate evaluation for such workers and others who provide critical care to the elderly, the disabled and other vulnerable populations. That report is not expected to be completed until February, however, meaning new rates likely won’t kick in until fiscal year 2022.
Appropriations Committee members pressed DHHS officials on that issue.
DHHS Committee Chairman Rep. Drew Gattine, D-Westbrook, pointed out that DHHS has “achieved a lot of savings” in MaineCare during the past six months. Those savings come from a combination of reduced utilization of some services – such as routine or elective medical care – as well as higher federal Medicaid reimbursements.
The department plans to tap $100 million of those unspent funds to help offset the overall shortfall in the state budget. As one of the lawmakers responsible for ensuring Maine has a balanced budget, Gattine said he appreciated those efforts but also wants to make sure critical needs are being met.
“I and others … continue to be incredibly worried about how services are delivered to some vulnerable populations in our communities,” Gattine said. “And we want to make sure that is looked at and addressed very carefully.”
More Mainers are also signing up for the state’s Medicaid program during the pandemic, as anticipated.
Statistics from the Maine Department of Health and Human Services show enrollment in MaineCare grew by just over 17,300 between March 1 and June 1 as Mainers became unemployed or chose to take advantage of the program. Nonetheless, total enrollment remains lower than anticipated when Mills expanded Medicaid eligibility upon entering office in January 2018.
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