Exclusive Interview by Ramona du Houx

December 23, 2010

Governor John E.  Baldacci at the unveiling of his portrait at the Maine State House. Photo by Ramona du Houx

You’ve always looked at issues being interconnected. Why?

Our environment, energy, economic development, education, and all of healthcare policies are interconnected with each other. When you dig into these issues, you see how they all work together. They are not separate islands. Acknowledging them as being interconnected helps to form better policy because you are also looking at how issues affect each other.

The Dirigo Health Reform Act was you overall healthcare plan, which implemented reforms and restructuring in Maine’s healthcare systems, with a focus on preventive care. DirigoChoice became the insurance component of the reform act. Is Dirigo Health doing what you wanted it to?

It was top priority to expand access to health insurance and to help Maine people be healthier. When we started looking at healthcare nothing was being done in Washington D.C. to address the problems that we faced. We had higher healthcare costs, and a growing number of people uninsured. In some cases people were working, and all their hard earned money was going straight into their healthcare. There were people trying to stretch out their prescription drugs by cutting their dosage in half because they couldn’t afford the next round of medicines, or another visit to the doctor. I remember someone who had a genetic disposal to cancer, but never could afford to be tested until Dirigo came along, in the nick of time.

Now, because of the measures we took with the Dirigo Health Reform Act, Maine can legitimately boast of ranking sixth for the best in health insurance coverage in the country, being a leader of the implementation of the nation’s Affordable Healthcare Act, and being the eighth healthiest state in the country.

Governor John Baldacci talks about his Dirigo Health Care Act with the help of school children at the State House in Augusta. Photo by Ramona du Houx, 2005

One of the benchmarks I looked at was prevention. If we could improve the overall health of the people of Maine then we could have an impact in terms of long-term healthcare costs, and the quality of health of individuals. I wanted to make Maine a healthier place because you can’t have a healthy economy unless you have healthy people. It was about cost, quality and access. That’s why we keep tobacco funds segregated from the budget because I thought it was imperative to work on prevention.

We all have a responsible role to play with our personal health. You can’t walk into the emergency room and say fix me, as if you had nothing to do with the experience. You’re the key participant. Emergency room visits, which could have been prevented by more access to doctors and preventive care measures, result in premiums going up because hospitals have to pay for that emergency room care. And bad eating habits, drinking, and smoking amount to forty percent of insurance premiums.

When it comes to preventative care, and primary care, with Dirigo Health there are no co-payments involved. As a result more people are taking preventive health care measures. They are becoming healthier, and have given themselves the opportunity to have a higher quality of life.

We created Quality Forums so physicians and consumers could weigh in on healthcare and best practices could be established. Now, Maine is nationally recognized, for our health data network. Because the data is accessible to citizens they can to shop and compare. And healthcare providers can see what everyone else is doing in their field so they can improve their practices, and healthcare outcomes. We now have a much more transparent system.

This year I was proud to hear that Dirigo Choice insurance rates are not going to increase because of the way they have been able to manage their system. Every other healthcare plan, in Maine, is increasing their healthcare rates.

It never grew as large as you wanted it to, why?

We worked within the money we had, not to put any tax burden on individuals.

When we set the program up we did it with one time federal funding that was being made available to the state. I told my team, “We have enough to start it but not enough to do all we want to do. I don’t want to tax people for it, or establish any fees for it. Let’s try and do it with what we have for resources.

We focused on making it pay for itself. We figured that if we started to decrease hospitalization and emergency room visits, than a percentage of those monetary savings could be fed back into covering people, making it self-sustainable. We recycled those revenues back into the fund to keep it going, and to expand access. That’s why it wasn’t as large as I would have liked it to be. We’ve had 34,000 people take part in the program, since it started. Over 11,000 are currently enrolled, from businesses, self-employed and individuals.

Governor Baldacci talks with Trish Riley, head of his DirgoHealth initiative in Portland, Maine in 2010 during an event where the Obama Administration recognized the pioneering  health care program and how it helped develop the ACA. Photo by Ramona du Houx

I wanted to see if it worked, and if the theory proved right. Frankly, it does.

What it also proves is that it is harder to take profits from insurance companies that they are spending on administration, and ask them to spend it on peoples healthcare by funneling a percentage of it back into the system. The regulatory system doesn’t allow for that to happen.

We have been able to demonstrate with reduced hospitalization and emergency room visits, and preventative care measure, you save healthcare premium dollars. And most importantly have healthier people.

If you take time to see if it works or not— you’ll see it works. The proof is in the pudding. I think those who want to dismantle it will have a hard time doing so because it works.

In fact if they take it apart the state would have a bill for $10 million annually, because we are covering parents of children that are covered. Dirigo pays for itself. Each new administration, and new legislature, comes in and has to kick the tires and see what’s under the hood, and frankly you have to welcome that. I believe in Dirigo Health. Anyone looking at it objectively will come to the same determination.

We’re now being recognized as being one of the healthiest states in the country. I’m proud about that, and what we have been able to do with healthcare. Especially, when I continue to hear the heart warming stories from businesses and individuals, that couldn’t get healthcare before.

What do you think are your major accomplishments in education?

What we’ve been doing is creating a K-16 network. So there is actually a comprehensive network over arching our educational institutions. One goal here was to bring funds that were being used for too many school district administrations, and put that money back into the classroom for our children. At the same time we’ve been advocating to increase math and science in the curriculum, and standardize the SAT’s. We were on the road to increase education spending, as the people mandated to 55 percent, then the recession hit.

If you want to impact the economy— the more people that have an associates or bachelors degree the more they earn.

That’s why, as one of my first pieces of legislation, we established the community college system. Until then we only had vocational schools. Transforming them into a community college system enabled us to incorporate curriculum for jobs in today’s economy.

We were one of the few states that didn’t have a community college system; at the same time we had a lot of older people that were getting laid off in the mills and factories. They had no place to go to be retrained with new skills. Community colleges provide that network. They also respond more directly to business needs in the areas they are established in and can create new curriculum.

Community colleges are a more affordable root for younger people to get their secondary year curriculum in English, and basic math skills. Those credits are now transferable to any of our universities if a student wants to pursue a bachelor degree through our Advantage U program. We have established more integration between the higher institutions.

Our Early College for ME program, provides a bridge into college for high school students by taking community college courses. Since 2003 community colleges have seen an 83 percent increase in students entering directly from high school.

Enrollment has grown 77 percent, since we established community colleges. In the past two years alone enrollment has grown 21 percent. Our community college system is now one of the fastest-growing systems of higher education in the nation.

People, who never dreamed of obtaining a college education, now have more opportunities to do so because of increased access.

The bill passed by the President, and Congress, to expand education tuition tax credits to make sure there isn’t a financial burden on the family or the student is a huge benefit. I have a son in college and I can attest to the benefit that it provides. When he, and his classmates, graduate they will be able to start earning and providing for themselves, living and raising their families here, and not having to go elsewhere to get higher incomes or different opportunities because of exurbanite college loan debt. It’s a huge opportunity for a lot of people.

What have you done to help build Maine’s innovation economy?

You have to invest in education to expand educational opportunities. You have to invest in research and development to expand economic development opportunities, which creates good jobs with benefits.

It comes back to the thirty in a thousand report from the State Planning Office which stated that, if you raise education levels of the population, over eighteen, to thirty percent of the population and invest a thousand dollars in research and development per worker, from where we were (in 2003) we could raise incomes of Maine workers to the national average. We aggressively ramped up research and development funding.

Every dollar in research and development funds awarded from Maine’s Technology Institute leverages more than $14 in public and private funds for the innovation economy. In 2008, even though the economy was in decline, Maine’s technology companies had a 36 percent growth in revenues.

The CEO of Old Town Canoe, Helen Johnson-Leopold, said to me, “Even in a flat economy if we have research and development in innovation, we can compete successfully.” And now, our research labs at UMaine are helping Old Town canoe develop new innovative products with composite technology.

State Planning Office Director Martha Freeman and Gov. John Baldacci talk with Dr. Habib Dagher the Director at UMaine’s composite center, AEWC, about offshore wind potential with floating wind turbine platforms developed at the center. The program could export wind energy throughout New England. Photo by Ramona du Houx
Dr. Habib Dagher and team and all the researchers at UMaine are doing tremendous work. Not only do they innovate working with new businesses they patent and promote their inventions by looking for companies that will be able to manufacture and commercialize them. The bridge-in-a-backpack is a great example. We made sure ten percent of the transportation budget had to go into using this technology in Maine, to showcase the benefits of using it. Secretary La Hood saw how the technology works first hand when he visited UMaine’s composite lab in Orono, and now Russia wants to build these bridges in Sochi for the next winter Olympics. It’s these kinds of innovations you will be seeing more of in the near future. Investing in these kinds of R&D projects has been central.

Twelve companies headquartered in the state of Maine were included on the 2010 Inc. 500|5000 list of the fastest growing privately held companies in America. To qualify the companies had to have revenues of at least $2 million in 2009.

We just got a financial report that’s going to impact on the budget. It’s going to increase the amount of revenues going into the general fund, because it’s been under estimated. It reforecasts revenues by over $400 million in this year, and in the next two years.

A large amount of those revenues are coming from corporate tax lines. I remind people those are corporations incorporated in Maine, doing business in Maine and around the world. Maine based businesses are being more successful than earlier forecast.

Maine has been proven to be a good place to do business.

According to the Maine Development Foundation from 2007 to 2008 Maine experienced greater growth in per capita personal income than the nation— 3.9 percent versus 2 percent. Then the recession hit. Now, in the first two quarters of 2010 personal income is on the rise again growing at 2.6 percent.

Maine’s labor market has stabilized with an unemployment rate at 7.3 percent, while the national average is 9.8 percent. We have the best workforce, the best quality of life, and the best natural resources. Anyone has an opportunity to do it all here with access to markets around the world.

How are Maine businesses doing around the world?

Trade missions with Maine’s International Trade Center have helped Maine companies break into new global markets, and are bringing international investments to Maine.

Gov. Baldacci at the Kibby Mt. wind farm. He made sure the state’s Renewal Energy Portfolio included massive wind development and other alternative energy sources. Photo by Ramona du Houx

I don’t really like leaving Maine. When I was in Washington D.C., for eight years, I never went on any of the trips other Congressmen took. But being Governor you soon realize that your drive, every single day, is to provide economic development in your state. You know that if you have an opportunity the best social service job is a good job and benefits and the best social service department isn’t Department of Human Services, it’s the family. So, I made it a point to go on the state’s trade missions.

Whether it’s helping to save mills, or going to Toronto with the head LaBree’s Bakery in Old Town, or meeting with our friends that are doing ergonomically designed handlebars— creating economic opportunities is all-important. Whatever it is— be it opening markets for Maine seafood to the world, promoting tourism, or spreading the word about the great opportunities we have in renewable energy, you have to go to where the markets are. That shows with the revenues that business are bringing in, from around the world.

Between 2002 and 2008, Maine exports rose over $1 billion. This year Maine became the 5th fastest growing State for exports. Over the past eight years Maine companies brought in $60 million in export sales as a direct result from MITC trade missions and trade shows. More and more small businesses are seeing their bottom line grow working with the MITC, as a resource. That will continue to grow in the near future.

The 2009 Trade and Energy Mission to Spain and Germany was the most successful trade mission to date with over $21 million of sales and contracts reported by the Maine companies. Because of that trip a lot of companies that didn’t know what Maine was doing at UMaine’s research center, in alternative energy, are now interested in investing in Maine’s offshore wind potential, and other projects.

Just this fall investment groups from Spain, France, Germany, and Norway toured the state under our new program called Invest in Maine. In April a trade mission will head to Japan and South Korea to follow up on businesses already interested in Maine. The major focus is Maine’s advanced renewables for the energy sector.

What have you done to decentralize economic development?

We established Mobilze Maine to empower local and regional development. We said, “we will give you the necessary resources and people so you can take responsibility more for your regions economic growth.”

Mobilze Maine inventories the assets in specific regions, with an interactive website. No two regions are alike. Every region has its own strengths and assets, and now they are able to advocate effectively for what they want. Augusta has become a partner to help them realize their opportunities.

We put our Quality of Place Initiative with MoblizeME to make sure our parks, and ecotourism advantages were listed as major assets. Almost three million people visit our state parks, from around the world every year. With all the work we have done, over and over again we have found that the economy and the environment go hand in hand. Our environment is an economic engine we need to continue to include as a major asset for economic development.

With the support of thousands of people, we completed Governor Baxter’s vision with the protection of Katahdin Lake. We have preserved more than a million acres of land, which will be available for hunting, fishing, canoeing and hiking and other traditional uses for generations to come.

We need to continue to promote Maine’s Quality of Place, which also includes our unique downtowns, as an economic driver, as well as increase forest preservation, and sustainable forestry practices. Businesses and future economic opportunities depend on Maine’s natural assets.

Mobilze Maine is funded by Fairpoint Communications; naturally the company wants Maine to have vibrant economic growth. It’s a partnership that benefits the entire state.

What’s your most important economic development tool?

Gov. John E. Baldacci celebrates a logging companies Pine Tree Zone certification in 2004. photo by Ramona du Houx

Pine Tree Zones (PTZs) are huge. This is one of the most aggressive economic development programs in the country. During the Pulp and Paper Days, put on by the University of Maine, a paper man from Alabama approached me and said, “Governor, you have the most aggressive incentive package that I’ve ever seen.” We do. We win in competitions, globally, to bring businesses here with Pine Tree Zones.
This program says— keep the tax revenues the state would have gotten for withholding, keep the sales tax for plant and equipment investments, and keep your corporate tax profits for the businesses you developed in our state— in return give our people good paying jobs and benefits. That’s the trade off.

As of September 309 companies have located to Maine or expanded their businesses here because of PTZ incentives. They represent a total investment of $873 million, with an annual payroll of $341 million. That’s 8,206 jobs. Over two hundred of these companies are in manufacturing. But if not for this program they wouldn’t be here.

The PTZ guaranteed the expansion of National Semi-Conductor, in Maine. They brought Backyard Farms, a unique hydroponic green house agricultural industry, to Maine. And Maine boat builders have been able to expand with PTZ status, and diversify into other growth areas, like composites. There are PTZ designated companies in all 16 counties, which represent businesses engaged in all of Maine’s economic growth sectors.

I’m very proud about this program and what its impact has been. It’s a ten-year commitment to these businesses. It levels the playing field in Maine. It’s not about taxes, its not about regulations— it’s about being able to compete in the global market place.

Once we leveled the playing field the people of Maine, as I knew they would, proved what great workers they are. A lot of established PTZ businesses decided to expand in Maine, like T- Mobile, Backyard Farms, and NotifyMD. T-Mobile now employs over eight hundred people, and their CEO says its one of their best centers, anywhere.

Where does Maine have future opportunities?

I think there is a bright future with clean energy. It’s not the end all be all but it can be a significant part.

In 2008, the Legislature set a goal of producing two gigawatts of wind power by 2020. We passed necessary legislation to advance development of Maine’s vast renewable ocean-energy resource as quickly as possible in an environmentally responsible way. It sets the stage for offshore floating wind platforms to be developed, out of sight and sound.

Dr. Habib Dagher at the UMaine, AEWC composite center talks with DOE Sec. Steven Chu about Maine’s plans for offshore wind development with floating wind platforms. As a result of the meeting Maine was granted millions for the effort.  Photo by Ramona du Houx

A regional approach to energy transmission is critical to the state’s overall energy independence. We established energy corridors to deliver that energy to the regional markets. It also gave the state permission to lease land to companies to access the grid. Those revenues will go to improve energy efficiency, weatherization, and renewable energy projects.

The key for us is going to be energy and transportation. They are both tied together.

Transportation, in the future, is going to be more electrically driven, with batteries in our cars. With geo-thermal, heat pumps, solar, and wind we will be able to heat our homes and businesses with electricity.

The Millinocket mill was nearly put out of existence because they were reliant upon oil instead of electricity. They were paying almost $140 a barrel, at that time. Since then we’ve been working. Now, they have biomass, are generating stream, and are producing electricity. The company is on a new golden road with opportunities to put people to work.

Today oil prices are escalating again. As soon as our economy shows any glimmer of hope those prices get spiked through the roof by speculators on Wall Street. They are making money hand over fist, while our people are getting hurt. We are the most oil dependent state, with over 80 percent homes and businesses relying on oil.

That’s why the push for windmills offshore and on land. That’s why the push for tidal power, solar, biofuels and pellets— all alternative forms of energy, that come from our natural resources in Maine. These sustainable energy generators are outside our back door. Smartly developed here we will stop billions of dollars, which is currently flowing overseas from Maine consumers using oil. That money would stay here, in the state.

Our local natural resources are invaluable. They can supply the electric energy to transform Maine’s economy.

I don’t want to see one more red nickel overseas. I only want to see our men and women fighting for what’s in our national security interests not to protect the oil chieftains in the Middle East. I feel strongly about this. I want to make sure we get our economy going again and we aren’t dependent upon someone else to run it.

Kibby Wind Farm, photo by Ramona du Houx

I believe truly that the plan for Maine’s future will include a large part of it being in energy. The expertise we have here at UMaine’s research labs and the development that is taking place could mean up to 15,000 jobs and an investment of over $15 billion dollars that will be made in Maine. We can manufacture the component parts here, and Maine companies like Reed and Reed and Cianbro, and others, could erect the windmills. We will be able to export the excess electrical energy to needy markets south of us. It’s an exciting project, which is on its way to becoming a reality.

Our weatherization efforts have received national attention and are being used as a model for other states to follow. We have a goal to weatherize all residences and 50 percent of businesses by 2030 and reduce the state’s consumption of liquid fossil fuels by at least 30 percent by 2030.

To help people weatherize their homes we established The Energy Efficiency Trust, where residents and businesses can get help to improve their homes or businesses with energy efficiency programs. Their successful summer promotion has been able to bring home the fact that yearly savings in oil costs are really substantial when you shore up your home.

The new PACE program will allow homeowners to borrow money through their municipalities, so more residents will be able to weatherize. This loan could then be repaid from the energy efficacy savings homeowners will see.

Maine is an active member of the Regional Greenhouse Gas Initiative (RGGI )— the first cap-and-trade program in the nation. The state has earned a total of $23,544,204 since the first auction over two years ago. Maine invests the proceeds in weatherization and energy-efficient programs.

I’m really proud about all the work we have put into energy policies, and what has been accomplished. It’s something that’s been embraced by all of Maine with energy laws that have been passed almost unanimously.

Maine had a heyday utilizing hydro-electric power, with towns, factories and mills powered by our rivers. Thousands of workers were employed. We now have an opportunity to tap into the same basic concept— to use our natural resources to produce the electrical energy we need for economic growth. Overheads in electrical costs will be cut; so more companies can invest in their businesses and grow.

With today’s alternative energy potential realized, innovative technologies, and broadband global connectedness, Maine will have a new heyday. One that can be sustained long into the future, one that will give our children opportunities to live, work, and raise their families here.

So, it’s a great future.

Despite having to deal with a Great Recession your leaving Maine in a better budgetary position then when you took office. How is that possible?

When I took office the tax foundation said that Maine had the fifth highest tax burden in the country, today Maine ranks at fifteen.

The Measures of Growth report, which looks at benchmarks of economic progress in the state, tells us that Maine’s overall tax burden has declined. This is largely because of initiatives such as school district consolidation and reform, corrections consolidation and reform, and spending caps on state, county and local governments that we instituted.

Despite the worst recession since the Great Depression Maine bucked the trend to raise taxes. We said, “No.”

We tapped into our ingenuity, and thought outside of the box. We have become more efficient with innovative policies and practices. State government has been trimmed by 1,000 jobs, and we’ve streamlined services giving people better outcomes. And being able to not increase taxes we put Maine in a much better position coming out of the recession.

State spending has declined every year since 2008. As much as some repeat miss-facts, the reality is that the state spending and general funding of the budget for this year is about the same dollar amount, $2.69 billion, as it was in 2001.

Instead of overspending Maine has been a model of restraint. That doesn’t work for political campaigns and political rhetoric but that’s the reality. I stand behind that reality. Those are the facts.

When I came into office we had a $1.2 billion structural gap. We had no money in reserves. A tax anticipation loan had been taken out in the amount of $250 million because they ran out of tax revenue to pay the bills, and it impacted our credit rating.

I had mills out there closing. On the night of my inauguration the Great Northern mill declared bankruptcy. Because it’s always important not to get alarmed I joked to people, “If we didn’t start at the bottom in 2003 we could at least see the bottom from where we were standing.”

Since that time, eight years later, we have over $100 million in surplus. And you have no tax anticipation. They tell me the cash pool – the pool of funds they use to pay the bills- is excellent. So, there is no need for any tax anticipation note, no need for any lending. So our credit rating is good which gives us a low interest rate for future bonding. It also helps with Fiduciary spending.

Because businesses in Maine are doing better than they forecasted, we have been able to lower the structural gap from $1.2 billion to $840 million. Half of that is raising the education funding to 55 percent, which I think is unrealistic at this time.

The next administration is coming in at a much better point in terms of budget, the reserves, and surpluses and borrowing than I did.

My responsibility has been to take it as it is and make it better than the way I found it, and the next administration has that same responsibility to the people of Maine.

We all live and work in Maine and we all want to prosper and see everybody doing well in the state. It’s my hope that great things happen in Maine because the people of Maine deserve them.