Maine’s recovery

 Maine State Capitol. Photo and editorial by Ramona du Houx

January 3rd, 2010

America has adverted a depression.

The American Recovery and Reinvestment Act is working. So far in Maine 3,500 people have been employed by it. In Maine’s bipartisan way, our U.S. representatives and senators voted for it.

Even during the recession, Maine has been growing its economy in certain sectors, aided by the grants from the Recovery Act. It’s important to remember and reflect on the reasons why that process is possible and how it all began, seven years ago.

When Governor John Baldacci came to office, he pledged not to raise income taxes, even when he faced a $1.2 billion budget gap. There was good reason.

For a state of 1.3 million people, government at the state, city, and county level is too large; not because of too many services, but because middlemen take the taxpayers’ money away from where it should be directed. Too many tax revenues pay salaries of administrative positions.

As State government proved, with the consolidation of school administrations, the correctional system, Health and Human Services, along with Internet technology streamlining, dramatic savings by cutting bureaucracies are possible. It’s also what the taxpayers want and expect, because it creates real efficiencies and gives them better services.

But even after seven years and a thousand jobs, government still could use more of the same medicine.

Forty-five percent of the state’s General Fund revenues pay for 500 municipalities, plus 16 counties. That’s a local government administration for every 2,500 residents. These local governments have twice as many employees as state government.

Funds saved from streamlining local municipalities, the state’s economic development agency, and natural resource agencies will help balance the budget.

To save and invest in people and programs for growth has been the mantra of the Baldacci administration. A major focus has always been to increase good jobs with benefits, and educational opportunities for people in the global economy.

With the various consolidation measures taken, state government saw surpluses and created a Rainy Day Fund, before the recession.

That gave the governor funds to invest. Those investments have seen dividends with more people earning higher degrees, health care serving more people, and research and development creating new technologies and businesses.

Because of Baldacci’s tax incentives for businesses, over three thousand skilled jobs have been added to the state, while manufacturing industries struggling across America have not been able to survive.

The process started when the governor leveled the playing field for businesses, creating Pine Tree Zones. Now over 200 companies have been certified as PTZ companies. In a global marketplace, offering these tax incentives is major.

Recently Johnson Outdoors, owners of Old Town Canoe, closed its Washington state operations and centered its canoe operations in Maine. Without those PTZ tax incentives, the company would have closed Old Town Canoe in Maine.

Increasing educational opportunities for the people of Maine and investing in research and development in the technologies of the future have been key in the state’s transition into the global economy.

With research by the Brookings Institution and the McKinsey & Company report in hand, the State developed a roadmap of how to grow the economy. Research began when Baldacci asked the help of Karen Mills, who is now President Obama’s Small Business Administration director.

After bipartisan work, areas where Maine excelled were identified. These areas of potential economic growth are called clusters, and grants focused to aid these areas were awarded to companies and educational institutions — growing the economy.

To save and invest: that’s how Maine’s economy is adding jobs, and has an unemployment rate of 8 percent, compared to the national average of 10 percent.

The state has been transitioning its economy for seven years. Maine has been awarded Recovery Act funds for cutting-edge wind technologies, alternative energy technologies, weatherization, Internet broadband infrastructure, highway and waterway infrastructure, and healthcare centers, because of the ongoing work that has taken place during these years.

The groundwork in Maine was laid for investment in targeted areas — sectors that correspond to the Recovery Act’s focus. Coincidence or good economics? When President Obama was elected, Maine was ready for a partner in Washington, DC, because of the ongoing work of the Baldacci administration.

The state is leading the nation in the effort to transition the economy into a green-energy economy.

Companies are locating and being created in the state, because of the governor’s push for Maine to become an alternative-energy producer.

Maine was awarded a U.S. Department of Energy grant to develop a research and development Center of Excellence for offshore wind. It was the only grant awarded in this category, and companies are lining up to be involved in offshore wind here.

The state is poised to become the center of offshore wind development in America. Maine’s boatbuilding companies are beginning to diversify into wind-power development technologies. Hodgdon Yachts won a cluster grant from Maine to start a new company focused on developing wind turbines and component parts.

The state’s 2010 Science and Technology Action Plan says Maine could raise per capita income from $33,962 to $42,000 in the next five years and increase research and development activity to $1.4 billion, making it 3 percent of the gross state product.

The report identifies growth industries like wind power, wood composite technology, biotechnology and manufacturing. We need to stay on course.

From research and development conducted at UMaine, to implementation of that research with Maine companies designing and building wind mills, Maine is powering up to become an energy exporter.

Maine is emerging from the recession by growing these jobs, which in turn adds more economic development in goods and services throughout the state.

During the last legislative session, Maine lowered income taxes, helping thousands of people.

Increasing income taxes at this stage could damage Maine’s recovery and growth.

Continuing to streamline government at all levels will enhance the services that people are receiving.

Economic recovery did not start in Maine with the Recovery Act; it started with the governor’s vision and its implementation to improve the quality of life for all the people of Maine, by increasing opportunities in education, jobs, and health care.

When the governor says he will not increase income taxes to fill the current $438 million budget gap, caused by the global recession, he has good reason.