Maine’s share of federal funds shows increase

WASHINGTON – Federal spending helped keep Maine and the rest of New England on solid economic footing over the past several years, and during much of the Clinton administration, two new private assessments show.

The Tax Foundation found that Maine ranked second in the United States in improving its lot over the past decade in terms of federal spending vs. the amount of federal tax dollars collected.

In 1999, Maine ranked 15th, taking in $1.31 in federal money for every $1 sent to the federal government. In contrast, a decade previous – in 1989 – Maine ranked 28th, with $1.05 in federal dollars channeled to the state for every $1 in taxes.

The difference between the two rankings – an increase of 13 positions – was surpassed only by Vermont, which jumped from 42nd in 1989, to 24th in 1999.

The tax dollars sent to Washington are returned to Maine in the form of federal retirement and disability payments, federal procurement money – used, for example, to buy destroyers from Bath Iron Works – and other federal grants and payments, such as Medicare, earned income tax credits, unemployment insurance, food stamps, low-income housing assistance and agricultural assistance.

Separately, the Northeast-Midwest Institute, in its annual report, takes a different, but equally positive, look at how Maine handled federal dollars.

Each resident in Maine contributed an average of $5,299 to the federal treasury, ranking 37th in the United States in 1999. Using slightly different standards, the Institute found that Maine received $1.33 for each dollar sent to Washington. Though the Institute showed Maine receiving 2 cents more per tax dollar, it also showed the state getting back a slightly smaller piece of the total pie when compared to other states.

“Maine’s share of federal spending drops but remains above average, and strong spending, combined with a low tax burden, yield a good return on federal tax dollars,” the Institute states. “Interestingly, the federal government has spent more on a per-capita basis in the Northeast than it has nationwide for each of the last 10 years.”

Over the decade, a “relatively high” level of federal spending in seven New England and Mid-Atlantic states – Connecticut, Maine, Maryland, Massachusetts, New York, Pennsylvania and Rhode Island – has accounted for the region’s strong economy.

Other states in the region get far less back, however, dragging down the average for the Northeast to below the averages for two of the four regions carved out by the Institute.

Taken as a whole, the Northeast gets back only 90 cents for every dollar sent to Washington. The lowest spending levels by the federal government were again concentrated in the Midwestern region, which gets back 86 cents for each dollar sent to Washington. The South fairs the best, taking in an estimated $1.18 for every dollar of federal taxes collected. The Western states broke about even, getting back $1.01 for every tax dollar.

The analysis shows not only how much the federal government spends, but how it collects $1.79 trillion in taxes.

Compared to a decade ago, the West is in a nosedive, the South is moving up modestly and the Midwest, after a drop, is just about at the same subpar level that it was a decade ago. The Northeast, meanwhile, has been on a jagged move slightly upward.

“Although no one suggests that each state should receive exactly as much in federal spending as it pays in federal taxes – the very concept of nationhood suggests a sharing of resources between wealthier and poorer areas – the persistence of imbalances poses a challenge to the federalism ideal,” the Institute said.

The Institute offers no recommendations.

The Tax Foundation, in its studies, cites Maine as an example of a state that has progressively moved upward over the decade – but like the other report, offers only general reasons for the shift.

The Institute snapshot reveals a number of factors that position Maine vs. the other states. For example, Maine received:

. $2.76 billion in federal retirement and disability payments, ranked 45th; however, the state received an average of $2,201 per person in federal retirement and disability assistance payments, a figure that was seventh in the United States

. $1.66 billion in federal grants, ranked 45th; however, on a per capita basis, the state received an average of $1,328 in federal grants per person, ranked sixth in the United States