While I did serve for several years as a member of Maine’s Consensus Economic Forecasting Commission, I was never much of a forecaster. Neither econometrics nor crystal balls interested me that much. I’ve always focused more on what I think people should be paying attention to than on what I think will actually happen.
Searching for the perspective from which to see the proverbial train wreck, I’d rather holler “Watch out!” than correctly (or incorrectly) predict the collision’s consequences. In keeping with that predilection, here are three “Watch outs” for 2016 offered in contrast to more currently buzz-worthy alternatives:
• In recent years, the fiscal focus in Augusta has centered on welfare. Who’s eligible? Who isn’t? Who’s cheating? How do we put a stop to that?
In virtually every town in Maine, the fiscal focus is on public education. We’re fortunate here that the focus is not on cheating, but rather on how we’re organized, how much we’re spending and how that spending is preparing our children to build satisfying lives for themselves.
In 2010, total (state plus federal) spending in Maine on welfare – meaning public medical insurance coverage and income assistance (and not counting the earned income tax credit) – amounted to just over $3.1 billion. Dividing by the 164,000 Mainers in poverty that year, this amounted to just over $19,000 per poor person.
Between 2010 and 2014, welfare spending increased 5 percent to just under $3.3 billion. The number of poor Mainers increased 16 percent to 190,000. As a result, welfare spending per poor Mainer fell 9 percent to just over $17,000 per person.
In fiscal year 2010, Maine had just over 192,000 resident students in public K-12 schools and spent just over $1.8 billion to operate their schools. By FY 2014, the number of students had dropped about 5 percent to just over 182,000 and operating costs increased just over 3 percent to over $1.9 billion. As a result, operating costs per student rose 9 percent to $10,500.
Most importantly from a taxpayer standpoint, the total value of taxable property was virtually the same in both periods at about $163 billion. The minimum required tax rate mandated by the state’s Essential Programs and Services Program, on the other hand, increased by over 17 percent – from $6.69 per $1,000 of assessed property value to $7.86 – and has continued to increase to $8.23 for fiscal year 2016.
In short, Maine’s property taxpayers have seen an increase of well over $1 billion in their bills even before considering capital expenses to repair or expand schools or “local extra” expenditures to improve programs. Call me out of touch, but my guess is that struggling with our education budgets will outweigh concern about welfare cheats this year.
• The onset of 2016 has rekindled interest in the minimum wage. There have been City Council votes and a municipal ballot question on this topic in Portland, and the city of Bangor and the state as a whole will undoubtedly see much ado about efforts to raise this foundational wage.
The more important decision for the overall state economy, however, will be made not at the ballot box, but in the board room. Will Maine’s business leaders recognize that the key to their future success lies in ensuring a continuous supply of talented, energetic, highly motivated workers? And, more importantly, will they give that glaring need the same attention they give to the material elements of their supply chains?
Will they, in short, put their money where their need is? Will they raise not their minimum wages, but their overall wages?
A quick glance at the data shows positive signs. Overall, Maine’s average wage for all employees rose by 5.6 percent from 2010 to 2014. More importantly, the average wage paid to new hires increased by 12 percent. Even more importantly, the average wage paid to new hires in private businesses that have operated in Maine for two to 10 years increased by 17 percent.
In short, businesses, particularly relatively young ones, seem to have realized Maine’s central challenge: You have to pay more to attract and cultivate the workers you need for success. This growing realization, while not commanding the buzz afforded to efforts to raise the minimum wage, will, I believe, have a far more significant effect on our economic well-being in 2016 than the fate of the minimum wage.
• Finally, there is the topic of entrepreneurship, of starting and growing one’s own business. In many ways, 2015 in Maine was the year of entrepreneurship, or at least the year of praising entrepreneurship. This attention has been welcome and, hopefully, will actually increase its occurrence here.
But all this celebration risks turning into xenophobia. In calling for more entrepreneurship in Maine, we cannot afford to turn away from or reject entrepreneurship coming to Maine. The purchase of a successful Maine startup by a company headquartered outside Maine should not be considered a defeat. The opening in Maine of a branch of a non-Maine company should not be criticized as “smokestack chasing.”
Our economic prosperity depends on ending the year with more good jobs than we had when we started. My guess is that those who fill those jobs won’t quit because the company’s current owner isn’t lucky enough to live in Maine.
Charles Lawton is chief economist for Planning Decisions, Inc. He can be contacted at:
clawton@planningdecisions.com
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