SECTION I – INTRODUCTION

 

The Compendium of State Fiscal Information, updated on an annual basis, provides a summary of the most important fiscal information affecting Maine State Government.  It includes a summary of actual operating revenue and expenditures, descriptions of revenue sources, and summaries of Maine’s debt, General Fund reserve fund balances and Maine’s tax burden.  The Office of Fiscal and Program Review hopes you find this information useful.  Recent additions and changes to this report (see What’s New at the end of this introduction) as part of efforts to improve its usefulness may result in some questions for those users who may be using this information for historical purposes.  Questions regarding conversions of data or suggestions for improvements to this report should be directed to:  Office of Fiscal and Program Review, 5 State House Station, Augusta, Maine 04333-0005, Telephone:  (207) 287-1635.

 

Report Layout

 

This report presents information in 6 different sections.  The first section, the Introduction, presents an overview of the report and some of the accounting methods used for the data included in this report.  The second section, Summary of Major Taxes and Revenue Sources, provides brief summaries of the major taxes and revenue sources.  Each summary includes a discussion of the current tax rates, current fees and assessments or a description of the types of revenue included in the category.  Each major revenue source includes a table providing a 10-year history of the revenue generated.  Most of the summaries also include a history providing information on when the tax, fee, or assessment was first adopted and the major amendments affecting that tax, fee, or assessment.  The third section, Revenues and Expenditures, provides exhibits detailing revenues and expenditures of Maine State Government by major fund type.  The fourth section, Maine’s Bonded Debt, includes a summary of Maine’s general obligation debt, debt of the Maine Governmental Facilities Authority and other tax supported debt.  The fifth section provides a history of the major General Fund Reserve Funds, the Maine Budget Stabilization Fund (formerly the Maine Rainy Day Fund) and the Reserve for General Fund Operating Capital.  The sixth and final section, State and Local Tax Burdens, provides a history of Maine’s taxes per capita and as a percentage of personal income.

 

Accounting and State Fiscal Year

 

The information in this report is presented on a budgetary basis, which summarizes all funds as they are recorded on the official accounting system maintained by the Office of the State Controller within the Department of Administrative and Financial Services.  (Note:  some minor adjustments have been made by the Office of Fiscal and Program Review to correct for certain data entry errors.)  Revenue recognition and the amounts included in this report are based on a modified accrual basis of accounting.  Revenues are recognized when they become both measurable and available.  The major taxes subject to accrual are the individual income tax, sales and use tax and the telecommunications personal property tax.  At the end of fiscal year 1999, fuel taxes and, at the end of fiscal year 2000, several additional taxes became subject to accrual.  Revenues from other sources are recognized when received and expenditures are recorded when paid.  The following table summarizes the major taxes that are subject to accrual and the amounts accrued for the last 5 fiscal years.

 

Table I-1   Major Revenue Accruals

Fiscal Years 2003 - 2007

REVENUE SOURCE

2003

2004

2005

2006

2007

Income Taxes

 

 

 

 

 

    Individual Income Tax

$60,819,780

$45,868,113

$49,841,992

$51,758,860

$58,382,364

    Corporate Income Tax

$2,483,700

$1,169,580

$1,500,000

$1,800,000

$3,300,000

Sales and Use Taxes

$85,052,032

$88,819,327

$88,234,996

$92,348,183

$95,663,824

Service Provider Tax

 

 

 

 

 

    General Fund

$0

$0

$4,351,569

$3,895,006

$4,262,070

    Other Special Revenue Funds

$0

$0

$0

$0

$0

Estate Tax

$3,933,230

$5,520,171

$3,000,000

$5,871,996

$7,010,914

Tobacco Products Tax

$324,000

$317,169

$450,000

$500,000

$542,156

Cigarette Tax

$0

$0

$0

$0

$0

Telecommunications Personal Prop. Tax

$29,097,186

$27,903,428

$25,004,898

$20,627,030

$18,171,425

Real Estate Transfer Tax

$1,962,000

$2,319,480

$2,500,000

$3,000,000

$3,000,000

    General Fund

$981,000

$1,159,740

$1,250,000

$1,500,000

$1,500,000

    Other Special Revenue Funds

$981,000

$1,159,740

$1,250,000

$1,500,000

$1,500,000

Gasoline Tax

$13,479,460

$15,244,957

$16,201,336

$16,174,139

$16,529,053

Special Fuel

$5,400,000

$3,682,938

$4,516,027

$4,637,224

$5,853,002

 

 

Maine State Government’s fiscal year runs from July 1st to June 30th.  References to fiscal year throughout this report will use the year in which the fiscal year ends, i.e., fiscal year 2007 refers to the fiscal year ending June 30, 2007.

 

Fund Accounting

 

The normal operations of Maine State Government are recorded and controlled on a fund basis in three major operating funds:  General Fund, Highway Fund and Other Special Revenue Funds.  The tables in Section III provide a summary of total revenues and expenditures of these three major operating funds.  An additional table has been included in this year’s report, which provides a history of expenditures for all funds, see page 75.

 

General Fund

 

The General Fund is the primary operating fund of Maine State Government.  It receives revenue from general state revenue sources not otherwise accounted for in another fund.  The largest sources of revenue are from the Individual Income Tax, Sales and Use Tax, Cigarette Tax and Corporate Income Tax.  These four major taxes account for more than 90% of General Fund revenue.  The Graph and Tables on pages 80 to 83 provide a summary of revenues and expenditures of the General Fund.

 

Highway Fund

 

The Highway Fund is used to account for revenue derived from excise taxes and license and other fees relating to the registration, operation, and use of vehicles on public highways and from fuel used for the propulsion of these vehicles, with fuel taxes representing roughly two-thirds of Highway Fund revenue.  Pursuant to the Constitution of Maine, Article IX, Section 19, this revenue must be used for highway related activities.  This revenue is expended primarily within the Departments of Transportation, Public Safety and the Secretary of State (Bureau of Motor Vehicles).  The Graph and Tables on pages 85 to 88 summarize the revenues and expenditures of the Highway Fund.

 

Other Special Revenue Funds

 

Other Special Revenue Funds receive their revenues from segregated or dedicated sources.  The funds are expended by category for special purposes.  The state’s own source dedicated or special funds are segregated from the Federal Funds in this report and are referred to in this report as Other Special Revenue Funds.  The Fund for a Healthy Maine (whose primary income source is Tobacco Settlement funds) is also included within this grouping.  The graph and tables on pages 89 to 93 summarize the revenues and expenditures grouped under Other Special Revenue Funds.  The revenue and expenditures of the Fund for a Healthy Maine are also detailed in 2 separate tables on page 93.

 

Federal Funds

 

A major revenue source within the broader definition of Other Special Revenue Funds is derived from the federal government, including federal matching funds and block grants.  This report separates out these Federal Funds (Federal Expenditures Fund and Federal Block Grant Fund) from the state’s own source Other Special Revenue Funds.  For the purposes of this report, the Federal Expenditures Fund and the Federal Block Grant Fund will be referred to as “Federal Funds.”  The graphs and tables on pages 94 to 97 summarize the revenue and expenditures of the Federal Funds.

 

Other Funds

 

In addition to the operating funds that are listed above, there are numerous other funds that are used to record specific activities.  The Debt Service Fund is used to account for issuance of general obligation debt and the use of general obligation debt proceeds as well as the revenue collected for the payment of principal and interest on certain revenue bonds.  Capital Project Funds are used to account for financial resources used to acquire major capital assets other than those financed by proprietary funds.  Proprietary funds are used to account for on-going activities supported by fees for goods or services, with Enterprise Funds accounting for activities offering goods and services to the general public and Internal Services Funds accounting for the offering of goods and services between state agencies.  Fiduciary funds, including Expendable Trust Funds, Non-expendable Trust Funds and Agency Funds, are used to account for assets held by the state acting as a trustee or an agent for individuals, organizations or other funds.  The table on page 75 provides a history of expenditures in these “non-operating” funds.  Debt Service Funds and Internal Service Funds are included in this exhibit and are sub-totaled separately, but are excluded from the Total State Expenditures to avoid double-counting certain expenditures.

   

Sources

 

The information contained in this report was compiled from the following sources:

  • State Controller’s records and reports;
  • State Treasury reports;
  • The Maine Revised Statutes Annotated;
  • State Planning Office;
  • Various state departments and agencies; and
  • The U.S. Department of Commerce.

 

What’s New

 

Last year’s Compendium of State Fiscal Information added the following:

 

  • 10-year revenue histories in Section II with the descriptions of the major revenue sources;
  • A new table providing historical data on all state expenditures by fund, in addition to the Operating Fund exhibits; and
  • New tables segregating Other Special Revenue Funds in Section III into 2 groups, one for Federal Funds and one for state own-source funds.

 

This year’s report includes the following changes:

 

  • Section V that provides a history of the Maine Budget Stabilization Fund has been expanded to include the other major General Fund reserve fund, the Reserve for General Fund Operating Capital.
  • Section VI has been expanded to include a new graph depicting an inflation-adjusted history of Maine’s tax burden per capita.

 

 

SECTION II – SUMMARY OF MAJOR TAXES AND REVENUE SOURCES

 

This section contains summaries of the major tax and revenue sources.  The summaries identify the tax base for each tax or the persons or entities required to pay each of the major license fees or assessments as of June 30, 2007.  For those revenue sources that are not considered taxes, fees or assessments, a discussion or description of the major contributions are provided.  The summaries also include a revenue history by fund of these categories.  Most of these summaries also include a statutory history showing dates of adoption and the major amendments to the tax, fee or assessment.

 

 

INDIVIDUAL INCOME TAX – 36 M.R.S.A Part 8

 

A tax is imposed for each taxable year on the Maine taxable income of every resident individual, estate and trust of this state.  Maine taxable income is based on federal adjusted gross income with several Maine specific adjustments.  Nonresident individuals, estates and trusts are subject to tax on income derived from sources within this state.  Tax rates are progressive from 2% to 8.5%.  Table II-1 on page 7 provides a summary of 2007 individual income tax schedules, personal exemptions and standard deductions.  For nonresident individuals, the rate is determined based on taxable income from all sources and applied to Maine sourced income to determine the tax.  Tax rates for fiduciaries are the same as those for single individuals.

 

Withholding of Maine income tax from wages is required of every employer who maintains an office or transacts business in Maine and who makes payment of any wages subject to Maine income tax, whether or not the employee is a Maine resident.  Every person who maintains an office or who transacts business in Maine and who makes payment of any other items of income which constitute Maine taxable income is also required to withhold Maine income tax from such payments if federal withholding is required.

 

Every partnership and S corporation having a resident partner or shareholder or having Maine derived income is required to file an information tax return.  Limited liability companies are taxed as partnerships or corporations according to the treatment elected by the company for purposes of the federal income tax.

 

Individual Income Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$907,981,057

$0

$907,981,057

1999

$1,004,937,795

$0

$1,004,937,795

2000

$1,074,622,161

$2,298,681

$1,076,920,843

2001

$1,167,749,567

$2,128,874

$1,169,878,441

2002

$1,069,834,791

$2,975,316

$1,072,810,107

2003

$1,071,701,694

$3,124,465

$1,074,826,159

2004

$1,156,715,909

$3,312,152

$1,160,028,060

2005

$1,296,255,557

$2,996,659

$1,299,252,216

2006

$1,364,368,543

$4,558,216

$1,368,926,759

2007

$1,464,928,346

$4,367,042

$1,469,295,388

 

Revenue Notes – Individual Income Tax – Individual income tax collections accrue to the General Fund.  At the end of each month 5.1% (increasing to 5.2% July 1, 2009) of this revenue is reserved for transfer to the Local Government Fund for municipal revenue sharing.   The amounts in Other Special Revenue Funds are revenue set aside for reimbursement to contractors/collection agencies under 36 M.R.S.A. §113.  Individual income tax revenue began year-end accruals of revenue in fiscal year 1996.  The amounts presented above are the gross amounts before the reductions for municipal revenue sharing and the transfers for tax relief programs described below.

 

History – Individual Income Tax

Adopted 1969.  Originally effective on July 1, 1969, for individuals, estates and trusts.  Amended numerous times since enactment to alter the tax rates and other provisions.  For individuals and fiduciaries, the tax rate brackets, standard deduction and personal exemption were made subject to indexing for inflation beginning in 1983 for each year except tax years 1988 and 1989.  For tax years 1992 through 1999 the tax rate brackets and personal exemption were not adjusted for inflation because the inflation factor was less than 1.000.  Beginning in 1989, the standard deduction is the same as the federal standard deduction except that for tax years beginning in 2003 and thereafter, federal increases to the standard deduction for married filers were not adopted.  Amended in 1998 to increase the personal exemption to $2,400 in 1998 and $2,750 in 1999 and indexed in subsequent years.  Amended in 1999 to increase the personal exemption to $2,850 in 2000 and subsequent years and repeal the indexing of the personal exemption.

 

 

INDIVIDUAL INCOME TAX – TAX RELIEF PROGRAM TRANSFERS – 36 M.R.S.A. §6203-A & §6656

 

Beginning in fiscal year 2005, amounts representing the cost of property tax relief payments to individuals under the Maine Residents Property Tax Program (also known as the circuit breaker program) are transferred from individual income tax revenue to the “Circuit Breaker reserve” to pay benefits certified under that program.  Prior to fiscal year 2005, benefits were paid from General Fund appropriations for that purpose.

 

Beginning in fiscal year 2006, amounts representing the cost of business personal property tax reimbursement payments under the Business Equipment Tax Reimbursement (BETR) program are transferred from individual income tax revenue to the “Business Equipment Tax Reimbursement reserve” to pay benefits under the BETR program.

 

Individual Income Tax – Tax Relief Program Transfers

Fiscal Year

General Fund

 General Fund

Total All Funds

Circuit Breaker Transfers

BETR Program Transfers

2005

($26,030,227)

$0

($26,030,227)

2006

($42,796,070)

($67,065,810)

($109,861,880)

2007

($44,440,759)

($66,553,092)

($110,993,852)

 

Revenue Notes – Individual Income Tax – Tax Relief Program Transfers

For budgetary accounting purposes, the transfers to the tax relief programs are deducted from Individual Income Tax revenue prior to the calculation of the transfer to revenue sharing so that these transfers reduce the transfers for municipal revenue sharing by 5.1% of the amount of the gross transfers.

 

History – Individual Income Tax – Tax Relief Program Transfers

The Circuit Breaker transfer mechanism was enacted by PL 2003, chapter 673, Part BB, effective for fiscal year 2005.  The BETR program transfer mechanism was enacted by PL 2005, chapter 12, Part BBB, effective for fiscal year 2006. 

 

Table II-1  State of Maine – Individual Income Tax – 2007 Rates

2007 Cost-of-living adjustment is 1.1365

Note:  The 2007 tax rate schedule dollar bracket amounts are adjusted by multiplying

 the cost-of-living adjustment, 1.1365, by the dollar amounts of the tax rate tables

 specified in 36 M.R.S.A. §5111 subsections 1-B, 2-B and 3-B (see 36 M.R.S.A. §5403).  The personal exemption amount is not subject to the inflation adjustment for tax year 2007.

 

 

Tax Rate Schedule #1

FOR SINGLE INDIVIDUALS AND MARRIED PERSONS FILING SEPARATE RETURNS

If the taxable income is:

Less than $4,750

$4,750 but less than $9,450

$9,450 but less than $18,950

$18,950 or more

The tax is:

2.0% of the taxable income

$95 plus 4.5% of excess over $4,750

$307 plus 7.0% of excess over $9,450

$972 plus 8.5% of excess over $18,950

 

Tax Rate Schedule #2

FOR UNMARRIED OR LEGALLY SEPARATED INDIVIDUALS WHO QUALIFY AS HEADS-OF-HOUSEHOLDS

If the taxable income is:

Less than $7,150

$7,150 but less than $14,200

$14,200 but less than $28,450

$28,450 or more

The tax is:

2.0 of the taxable income

$143 plus 4.5% of excess over $7,150

$460 plus 7.0% of excess over $14,200

$1,458 plus 8.5% of excess over $28,450

 

Tax Rate Schedule #3

FOR MARRIED INDIVIDUALS AND SURVIVING SPOUSES FILING JOINT RETURNS

If the taxable income is:

Less than $9,500

$9,500 but less than $18,950

$18,950 but less than $37,950

$37,950 or more

The tax is:

2.0% of the taxable income

$190 plus 4.5% of excess over $9,500

$615 plus 7.0% of excess over $18,950

$1,945 plus 8.5% of excess over $37,950

 

PERSONAL EXEMPTION:  $2,850

 

STANDARD DEDUCTION:

        Single - $5,350

        Head-of-Household - $7,850

 

 

Married Filing Jointly - $8,900

Married Filing Separate - $4,450

 

Additional Amount for Age or Blindness:

$1,050 if married (whether filing jointly or separately) or a qualified surviving spouse.  The additional amount is $2,100 if one spouse is 65 or over and blind, $2,100* if both spouses are 65 or over, $4,200* if both spouses are 65 or over and blind, etc.

 

*If married filing separately, these amounts apply only if you can claim an exemption for your spouse.

 

$1,300 if unmarried (single or head-of-household).  The additional amount is $2,600 if the individual is both 65 or over and blind.

 

Note:  If taxpayer can be claimed as a dependent on another person’s return, the standard deduction is the greater of $850 or earned income plus $300 (up to the standard deduction amount).

 

 

CORPORATE INCOME TAX – 36 M.R.S.A. Part 8

 

A corporate income tax is imposed on all corporations subject to federal income tax and having nexus with Maine with the exception of financial institutions subject to the franchise tax and insurance companies subject to the insurance premium tax.  The tax is levied on Maine net income which is federal taxable income as modified by Maine law.  In the case of a corporation doing business both within and outside of the state before 2007, Maine net income was determined by apportioning the modified federal taxable income according to a formula using payroll, property and sales (double-weighted).  Beginning in 2007, modified federal taxable income is apportioned based on the percentage of the taxpayer’s sales in Maine.  The income of mutual fund service providers is also apportioned based only on sales.  Tax rates are progressive from 3.5% to 8.93% (see table below).  A taxable corporation that is a member of an affiliated group operating in a unitary fashion must file a combined report.

 

Corporate Tax Rates

If the taxable income is:

The tax rate is:

 $           0 but not over  $ 25,000

3.50%

 $  25,000 but not over   $ 75,000 

7.93%

 $  75,000 but not over  $250,000

8.33%

 $250,000 or over

8.93%

 

Limited liability companies are taxed as partnerships or corporations according to the treatment elected by the company for purposes of the federal income tax.

 

Corporate Income Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$107,375,484

$0

$107,375,484

1999

$144,942,751

$0

$144,942,751

2000

$150,045,645

$0

$150,045,645

2001

$96,102,796