Economist: Maine’s improving

HALLOWELL – There was a little good news on the financial front Monday for Mainers who have grown tired of hearing that the only state with worse economic growth than Maine in 2005 was hurricane-ravaged Louisiana.

Darcy Rollins, a policy analyst with the Federal Reserve Bank of Boston’s New England Public Policy Center, told more than 100 participants at a state budget workshop that, in recent months, Maine seems to be slowly finding its way out of the economic doldrums.

“I’m pleased to report that conditions have improved somewhat according to the economic activity index,” she said. “Maine’s economy is now growing slightly. I think that it’s less than 0.5 percent.”

Rollins was the keynote speaker at the Maine Public Spending Research Group’s 2006 Maine Budget Workshop.

Held at the Maple Hill Farm Conference Center, the nonpartisan, nonprofit educational corporation’s event attracted numerous legislators, policy wonks, lobbyists and bureaucrats.

The organization compiled economic statistics for the audience and featured several panel discussions on the complexities of the state’s two-year budget and the political influences that shape the final product.

In analyzing the state’s profile in New England’s regional economy, Rollins’ review of standard economic indicators provided a mixed assessment of the economy in the years ahead when several developments could pose serious challenges to Maine residents.

Although the New England Public Policy Center predicts Maine’s gross state product will grow faster from 2005 through 2010 than either Massachusetts or Rhode Island, the projected 2.7 percent growth rate lags behind the region’s 3.1 percent rate and the national growth rate estimated at 3.1 percent.

Additionally, Rollins said Maine’s employment growth rate could also stand to improve after charting only a 0.5 percent increase between July 2005 and July 2006. That figure is slightly behind the New England rate of 0.8 percent and far below the national average of 1.5 percent.

“We should hope that the rate of employment growth increases in the region in the future as well,” she said. “Recent regional employment trends have been somewhat discouraging.”

Despite tepid employment growth, personal income growth for Maine is expected to float very close to the predicted New England 1.9 percent average from 2005 through 2010.

But it was the group of Mainers less likely to be in the work force that are of the greatest concern to Rollins. Although the state’s population grew by 46,582 between April 2000 and July 2005, many of the newcomers are retirees.

According to Rollins, more than 25 percent of all Mainers will be 65 or older by 2030, resulting in a significant decline in the state’s working-age population.

“This problem is exacerbated by the fact that we’re already relatively old,” Rollins said. “By 2030, Maine and Connecticut are actually predicted to see a decline in their working age population. So over the next few decades the regions will grapple with having a larger share of elderly requiring additional services and a smaller share of working-age population to pay the taxes to support those services and this will likely have a significant effect on the state budget.”

Earlier in the day’s program, a panel of economists weighed in with their opinions on obstacles impeding the ability of state policymakers to craft a state budget that addresses the population’s most important needs while assessing taxes fairly.

One of the panelists, Chuck Lawton of Planning Decisions, piqued the audience’s interest as he made an argument for a new approach to budget writing for the state that currently runs on a roughly $6 billion budget over its two-year budget cycle that ends on June 30, 2007.

Lawton said it’s time for the state to devise a method of determining what Maine gets for its tax dollars – an exercise he said frequently becomes lost in a bureaucratic process with no definable goals.

“Right now, the only goal of the system is to balance the budget and get through the session and finish even under the constitution,” he said. “Every dollar is equal to every other dollar – wherever it comes from and whatever it’s spent for [lawmakers say] all we need to do is balance it and we’re off. The only way we can escape that logic is to have some dollars more important than other dollars. And the only way to make that conclusion is to link them to some sort of outcome.”

Sen. Peter Mills, R-Skowhegan and former GOP gubernatorial candidate, agreed with Lawton, who said lawmakers might wish to consider that it is more important to pay for the health care of an ill person than to equip a child with the ability to earn an income in a global economy – particularly if the educational program cannot demonstrate that it’s producing the desired result.

“I based my whole campaign for governor on this theme that we need to manage by objective and whatever we don’t measure, we’re not managing,” Mills said.

But Kit St. John of the Maine Center for Economic Policy challenged Lawton and Mills on prioritizing budget goals, arguing that the Legislature’s Appropriations Committee commonly prioritizes as it works to reach consensus. St. John said analyzing what works in government is no easy task.

“Evaluating the outcomes of government spending is very difficult,” he said. “Should the [state] corrections department be held responsible whether crime goes up or down? … Figuring out what the correct performance measure of the corrections department or the county jail is, is an example of how difficult it is to measure outcomes of government spending.”