U.S. ups spending in Maine State gets $7.8 billion, mostly for social needs

AUGUSTA – Federal spending in Maine increased 7.8 percent last year, up to more than $7.8 billion, according to a report released Thursday by the U.S. Census Bureau.

That continues a trend of Mainers’ getting back more from the federal government than they pay in federal income taxes.

“Maine has been a net importer of federal funds for quite a while,” said University of Southern Maine economics professor Charles Colgan. “And Maine’s economy has benefited from getting more money than we pay in.”

The most recent statistics from the Internal Revenue Service indicates Mainers paid in just over $4.6 billion in taxes during 1998. Colgan said it is likely that amount went up in 2000, but he added that any increase was likely proportional to the overall hike in federal spending.

Finance Commissioner Janet Waldron said she is not surprised at the amount of federal funds spent in the state. But she said most Mainers will probably be surprised.

“I don’t think people have looked at this in the aggregate, so yes, I suspect most people will be surprised at these numbers,” she said.

Joyce Benson, an economist with the State Planning Office, agreed. She said the $7.8 billion is about a quarter of all personal income in the state, based on 1999 figures.

“We just got these figures ourselves, but it is clear there is a big impact overall on Maine’s economy,” she said. “While overall spending increased 7.8 percent, nondefense spending was up 9 percent with defense spending up 2 percent.”

The federal spending report released Thursday indicated some areas of federal spending in Maine grew much faster than others. For example, the Medicaid program increased by more than $92 million, to $893.6 million, in 2000. And welfare payments actually decreased by about $20,000.

“I think one area that is significant is the amount of federal funds going to pay the medical care costs in Maine,” Colgan said. “You not only have the increase in Medicaid, you have Medicare as well, and that is all federal dollars.”

Medicaid pays for the health care costs of poor Mainers, including the disabled and very poor older persons. Medicare helps pay the medical bills of those over 65. Medicare expenditures in Maine went up from $851 million to $879 million.

Defense spending in the state also increased, but not by as large a percentage. Defense Department domestic spending, which includes procurement contracts, payroll, military pensions and grants, totaled $1.303 billion in Maine last year, up from $1.275 billion in 1999.

Another major influx of cash comes from federal payments under the Social Security system, payments to retired federal employees and veterans’ benefits. In 2000, they totaled $2.7 billion. To put that in some perspective, all state government spending, for all services and programs, was also about $2.7 billion last year.

“This all shows, I think, just how dependent Maine’s economy is on the federal government,” said Christopher St. John, executive director for the Maine Center For Economic Policy, an Augusta-based think tank. “Our population is older and sicker and poorer than the average populations of all the states, so we are more dependent on programs like Social Security, Medicare and Medicaid and SSI and all of those programs.”

He said many federal programs, such as Medicaid, welfare and food stamps, base state allocations on income, and Maine is a poor state. St. John said Maine’s economy also has a greater dependence on defense spending than many states because of Bath Iron Works, the Portsmouth Naval Shipyard in Kittery and the Brunswick Naval Air Station.

“We have always had a higher than national average per capita spending for defense, and even with the base closings and cuts, I believe we are still above the national average,” he said.

Compared to neighboring New Hampshire, Maine did quite well in attracting federal funds. The 2000 Census pegged Maine’s population at about 39,000 more residents than New Hampshire, but Maine’s $7.8 billion from the federal government was $2 billion higher than New Hampshire’s share.

“That’s likely because New Hampshire is a wealthier state than Maine,” Colgan said. “Many of the federal programs are based on poverty rates, so that is part of why we get more federal funds.”

The Census Bureau report backs up that analysis. Maine received $81 million for the food stamp program to help low-income residents buy food. New Hampshire received just $28 million.

St. John said another factor is that Maine also has more elderly residents, and one key program for seniors is Medicare. The figures seem to support that point. Maine’s $879 million in Medicare expenditures is significantly higher than New Hampshire’s $710 million.

California benefited more than any state from federal spending, receiving $176 billion, followed by New York at $110 billion, Texas with $106 billion, Florida at $93 billion and Pennsylvania with $74 billion. Combined, these five populous states received 34 percent of all federal expenditures in 2000.