Ranking Maine

For turning a fire hose on the sputtering twigs that fuel Maine’s economic furnace, there’s nothing like consecutive national news stories showing that that state has the highest tax burden and ranks a dismal 48th in business friendliness based on those taxes. Embarrassing as these stories may be, however, the conclusions that this state’s tax burden – taxes relative to income – is high and therefore unattractive to businesses are of no particular use here because they are merely symptoms of more important challenges in Maine’s economy.

The stories about both the recent Census figures and a new report by a group called the Small Business Survival Committee point out the obvious: Maine is a poor state with costly government services. These and others like them, however, overlook or under-emphasize more important questions. For instance, is Maine’s economy moving in a positive direction or getting weaker? How productive are Maine’s workplaces? Is Maine making investments in areas like research and development, education and infrastructure? What steps has Maine taken to turn around shrinking populations that can rob communities of even the potential for economic development? Does Maine get good value for its tax money? How well does the state target development over simple growth?

The answers to all of these questions are complex. If rural, isolated towns with little hope of economic revival are the measure, Maine has plenty of them, and the conclusion is clear that it is not getting good value from its government. But just as undeniably, Maine is one of the safest states and has scores on national academic tests that make its schools among the nation’s best. Its low infant mortality rate, low teen-age pregnancy rate and comparatively generous Medicaid system puts it at the forefront for services. It is hard to believe that none of this matters to small businesses, yet, except for the crime rate, the report Tuesday didn’t in-clude them (or, for that matter, the fact that Maine’s user fees, a big deal elsewhere, are relatively low or nonexistent).

Maine in recent years has had encouraging successes in areas such as education and R&D investments as well as some prolonged failures, as its income and population numbers show. The King administration talks ceaselessly about attracting business to the state but admits it isn’t pleased with where Maine currently stands. Advocacy group after advocacy group forms, announces its intention to lead Maine to new heights of economic success, then falls into the general chatter about unfunded mandates and the minimum wage.

No surprise, then, that Maine suffers from the lack of a clearly articulated argument of what it wants and why it should sacrifice to get it.

A couple of thoughts:

. Maine almost never speaks with a single voice, but it is clear enough that it favors economic development – building on what it has, increasing the value of its products, emphasizing its strengths of natural re-sources and a skilled labor force with the goal of helping the people here become better off – over economic growth, which means trying to attract or create any business that could be enticed to open shop here.

. Two years ago, UMaine economist James Breece looked at productivity in Maine and found quite a disparity among industries. Productivity isn’t about how hard people work; it’s about the monetary value of the kind of work they do. It’s the value of goods and services produced divided by the number of people who produced it. It’s bang for the buck and it’s key to development.

Furniture making, for those keeping track, turned out to be the industry that gained the most productivity in recent years. The overall point of the Breece study, however, was that Maine tied with Vermont for least productive in New England and was well below the national average. And the message from the study was equally certain: a small state with high energy costs, high workers’ comp rates, high taxes and distant markets has the best chance of success by emphasizing development over growth. It is why the best program to come of state government recently has been 30/1,000 – 30 percent of workers with college degrees, $1,000 per capita investment in R&D. The state, it needs hardly be said, is nowhere near these goals.

. Maine does not have to eliminate all of its negatives, and probably can’t in any event; it needs to decide what it can be good at and then target the negatives that most affect those industries. That means taking a risk, saying one type of industry is more important to Maine’s future than another type. But the alternative, the status quo of an underpowered attempt to do everything, has proven even riskier.

None of this takes away from the fact that Maine income is too low, making the tax burden too high. And certainly, workers’ comp costs hurt businesses. No question that government could become a more effective advocate for economic development. Maine’s concern, however, is less about how some business trade group ranks the state and more about whether its leaders can gather the energy and the skill to turn around a decades long slide into economic failure. And that has turned out to be the toughest question of all.