Economic analysts predict difficult times for Maine

AUGUSTA – Proposed military cutbacks and other potential economic developments in Maine could leave the state reeling for years, according to some economic analysts.

Members of the state Revenue Forecasting Committee and the Consensus Economic Forecasting Commission met jointly Thursday morning to weigh the potential economic impact for the state should the Base Realignment and Closure Commission decide to take action against three major installations in Maine. The two panels are composed of more than a dozen of the state’s leading economists, who fear such action could deliver a blow that would set the state back 10 years.

John Davulis, chief economist for Central Maine Power Co. and a CEFC member, painted a bleak future for the state if all of the worst-case economic scenarios materialize.

They include:

. The closure of the Portsmouth Naval Shipyard.

. The closure of the Defense, Finance and Accounting Service office in Limestone.

. The reclassification of the Brunswick Naval Air Station to a standby facility without planes or associated personnel.

. Continued layoffs at Bath Iron Works as the result of the U.S. Navy’s decision to reduce the number of contract awards for the DDG-51 destroyer program.

Gov. John E. Baldacci has cited statistics from the State Planning Office indicating the Defense Department’s implementation of the recommendations to BRAC would cost the state 12,000 jobs directly and indirectly over a two-year period. Davulis said the aftershocks from such a drain on the state’s work force would be felt for years.

“We’re already starting from a low [growth] base,” he said. “If you take Global Insights’ [an international economic forecasting group] forecast as a base, they’ve already got us at somewhere between 48th and 50th in the country for employment growth, about half the rate of the U.S. – and that’s before we lose the military bases.”

Davulis said he strongly believes Maine will see a recession within the next five years accompanied by a deflation of the housing market, as substantiated by a recent survey in USA Today.

“So if you compound the loss of jobs at the military base with the potential recession and the housing market going flat, I see that we’ve got a tough decade – not optimistic,” he said.

Members of the two panels also were provided with statistical data compiled by the state Department of Labor indicating job loss repercussions would spread throughout the state. Due to the older age profile of many of the workers, their specialized field and substantial salaries, the report stated many displaced workers would experience a substantial drop in earnings upon finding new jobs while others simply would opt to leave the state.

Charles Colgan, a professor of public policy and management at the University of Southern Maine and a member of the CEFC, said different economic models are being used to determine the impact of the BRAC recommendations and not all are relying on the same criteria. All of the members acknowledged that their assignment of developing an economic projection for state government was being made more difficult by the uncertainties stemming from whether any or all of the Department of Defense facilities will close.

“I think when you look at it all together, we are going to be looking at potentially severe problems,” Colgan said.

Other developing economic hot spots mentioned by the panelists included BIW cutbacks and the acquisition of MBNA by Bank of America, which was announced this week. In a story published in Thursday’s New York Times, the $35 billion cash-and-stock deal reportedly would involve the elimination of 6,000 jobs. MBNA is the nation’s largest credit card bank with call centers in Portland, Orono, Presque Isle, Brunswick, Farmington and Fort Kent. The company has 27,000 employees worldwide, including 3,000 in Maine.

Colgan said it would take some time to determine how Maine would fare in the proposed 6,000-job reduction.

“Who knows what 6,000 jobs is, it’s such a sprawling empire,” he said. “I can’t imagine that 6,000 jobs are going to make the difference on a $35 billion merger. … I suspect that there will be some hits in Maine, but Maine has already taken a cut on the MBNA operations. Some of that may change, but I don’t think they’re going to pack up and leave entirely.”

The economic forecasters agreed that another meeting may need to be called in September to assess the BRAC decision expected in late August.