Report gives Maine mixed grades on economic development

AUGUSTA – Maine received mixed grades for its 2005 economic development efforts, losing ground in some measures while gaining in others among the 68 categories ranked by a Washington-based nonprofit.

In 2004, Maine received a B for performance, a C for business vitality and a D for development capacity in a study by the nonprofit Corporation for Enterprise Development.

In the latest study, based on 2005 measures, the state maintained its B but slipped to a D for business vitality while improving to a C in development capacity.

“Maine has demonstrated that it is a good place to live, but an unremarkable place to work,” said the nonprofit’s report released last week “Despite Maine’s high quality of life for its workers, the state needs to improve its standing in terms of a healthy economy for businesses and economic growth.”

Maine lost ground in some of the key indicators of business vitality, the report concluded.

For example, the state was 39th in job growth due to new business and 36th in employment by technology-based industries and in companies that trade their stock publicly.

The CFED report has the state first in the country in four measures, including use of renewable energy and in rate of recycling.

It has six measures that are ranked second in the nation, including high school completion rate and number of businesses created through university-based research and development.

But the state also had 18 measures in the bottom fifth of the states. Overall energy costs were 40th in the nation and 45th in royalties and licenses.

“A lot of the findings are very valid,” state Economic Development Commissioner Jack Cashman said. “It shows that we have made progress, but not as fast as other states that are investing more in their future.”

David Buchholz, research director for the nonprofit, said the report is designed to serve as a reminder “that states must also focus investments on workers, education and business. Long-term economic development success demands more than tax incentives.”

Lisa Pohlman, associate director of the Maine Center for Economic Policy in Augusta, said the CFED report is the most comprehensive study used in comparing the states.

She said its strength is the wide number of measures used to compile the “grades,” which are really three indexes of performance.

“You can’t get everything in a report,” she said. “This is one of the oldest reports around, and the folks that put together the Maine Measures of Growth used this as a model.”

But Scott Moody, senior economist at the Portland-based Maine Heritage Policy Center, faulted the study in one area. He said it never directly measures the impact of the burden on economic development caused by taxes and other costs determined by state policy.

“There is no measure of the total state and local tax burden,” he said. “There is not any measure of workers’ [compensation] costs or health insurance costs. If these were included I think they would make Maine’s ranking even worse.”

Moody acknowledged he has not seen an index that uses all of the CFED measures, plus the additional measures he believes should be part of a study of how a state is doing.

Pohlman disagreed with Moody that the index should include every possible factor affecting the state’s economy. She said some measures work better than others, and she believes the long track record of the CFED report shows it is a good measure.

“This report shows we have a lot to do to catch up with the rest of the country,” she said.

On that point, Moody agreed. But he said the private sector numbers would be far better if the state “got out of the way” and let businesses decide on investments without state interference.

Cashman said it is clear to him there are areas the state needs to invest in. He is “greatly disappointed” that Maine has not moved out of last place in the nation when it comes to academic research and development and the number of graduate students in science and engineering. The state has ranked 50th in both measures for years.

“We simply have got to do better,” he said, “and we are trying to do more with higher education and research, but other states are doing more than we are, so we are not moving up in this and other rankings.”

Members of the Maine Economic Growth Council are expected to release their annual Maine Measures of Growth report later this week. Sen. Lynn Bromley, D-South Portland, the co-chair of the group, said that report has many of the same measures as the CFED report.

“But you will see there are some measures showing positive movement for the state,” she said.