Five intertwined issues will dominate Maine's immediate
economic future, affecting businesses and residents alike, according to a
state agency charged with keeping an eye to the future.
The topics, listed by the Maine State Planning Office in its new "Maine
Issues for the Future" report, include improving government efficiency, building
a knowledge-based economy, reforming taxes, population trends and the state
Each is a critical part of the state's future. And all five are intertwined
with each other and with other aspects of the broader economy.
Still, the estimated $2 billion state budget gap definitely tops the
list of priorities, said state economist Laurie Lachance. How the government
addresses that shortfall will have enormous implications on commercial issues
such as taxation, employment, economic development and government contracts.
"That's really going to shape the discussions of the Legislature and
the incoming administration more than over the next six months," said Lachance.
"It's truly going to be over the next two years as they try to struggle with
this gap that appears to be over $2 billion. It's unfortunate; it's not the
way for any administration to start. It places tremendous limits and tremendous
pressure to come in and hit the ground running absolutely quickly."
The effort to cover the budget gap is interwoven with many other economic
issues, especially tax reform and improving government efficiency, Lachance
Those two topics are intimately interwoven, said Godfrey Wood, chief
executive officer of the Greater Portland Chambers of Commerce.
"I don't think there's any point in even thinking about tax reform
until you think about restructuring the cost of services. It's the cost that
drives the taxes," said Wood. "It's a huge issue for business, it's more
of an issue for the citizens of the state."
Inefficiency comes from duplication of effort and lack of efficient
purchasing among the state, local and county levels of government.
The culture of Maine communities taking care of services at a local
level is deeply ingrained, Wood and Lachance said. But that commitment comes
at a cost.
"It's not just about control. In many instances, it's about community
identity, and that sense of a scale of community in which you operate, that
you do have influence," Lachance said. "Unfortunately, it becomes a very
expensive way to deliver certain services.
"From an economist's point of view, I do believe it is in the best
long-term interest of Maine - not just short-term to solve this budget crisis
- to wherever possible try to trim the costs of delivering government services.
Some of that has to come from efficiencies in regional operating, it absolutely
Wood and Lachance both advocate a comprehensive look at tax reform,
rather than individual proposals such as the property tax referendum proposals
that may come before voters.
Lachance has been working with former House Speaker Michael V. Saxl's
advisory council on tax reform, and is impressed with the proposal that's
The plan generally reduces the high end of income taxes, removes the
personal property tax on machinery and equipment, broadens the sales base
and establishes a circuit-breaker program to keep Mainers' overall tax burden
at a manageable level.
"At the least this is a proposal that has a lot of merit, and I hope
that people do take it seriously," said Lachance. "As a package, if we can
somehow prevent ourselves from peeling away pieces of it, it does achieve
many good things on moving us forward."
Wood said his organization has also come up with a reform proposal,
which leans toward a spending cap, rather than a property tax cap. And reforming
the tax system could help businesses increase their spending on innovation.
"Our industries in Maine do not put a large amount of their income
into R&D," said Lachance. "Some of that ties into other issues - when
there are other costs of doing business that are a bit out of line, those
investment dollars go someplace else."
But even as the state works to cut business costs, it also must remain
focused on providing educational opportunities to its young people and reversing
demographic trends that have led to too-slow growth in Maine's work force.
"We absolutely need to keep focusing on the post-secondary education
piece, a strong K-12 and on to college," said Lachance. "That's half the
puzzle. The other half is to create a business climate that's vibrant enough
to attract the young workers and get them to stay."
Staff Writer Matt Wickenheiser can be contacted at 791- 6316 or at: