In 2009, Maine was awarded $5 million from a Federal TIGER I grant for improving the Portland International Marine Terminal (IMT), which it has since leveraged into $40 million more of State, Federal, and private investment. Through these investments, infrastructure for rail, truck, and ship transportation have been consolidated in one location, restoring the port’s historic national and international trade routes. Another $30 million in private investment is on the horizon. The Governor’s Office of Policy and Management (OPM) estimates that following this investment, in 2018, alone, IMT operations will be responsible for 272 jobs, a 106 percent increase over 2015. In 2018, IMT will generate $ 12,744,608 in labor compensation, with an annual average wage of nearly $47,000. [Note that this estimate does not include jobs and wages resulting from ongoing IMT construction.] Further, OPM estimates that total economic output generated by IMT in 2018 totals $ 35,117,341, a 96 percent increase over 2015. Post construction, Greater Portland Council of Governments estimates that the IMT is expected to generate 959 jobs, $47 million in wages, and $77 million in Gross Domestic Product, which equals $171 million in total annual impact to the state of Maine. For full report click here.
In November 2016, Maine passed, by referendum, a proposal to increase the state’s top marginal income tax rate from 7.15 percent to 10.15 percent—the highest rate in the country on household income of $200,000. Maine’s top rate is now nearly twice the national average of 5.33 percent and the Massachusetts flat rate of 5.10 percent, while New Hampshire has no income tax. This places Maine at both a regional and national disadvantage in recruiting and retaining professionals the state needs.
For example, two married doctors jointly earning $465,180 in Maine would now pay $44,266 in state income taxes, whereas the same couple earning the same income would pay $23,725 in Massachusetts, $30,950 in Nebraska, $14,281 in Pennsylvania, and $0 in New Hampshire. Even at Maine’s old rate, this couple would have paid $32,000 in state income taxes, given the old rate of 7.15 percent was already above the average state income tax rate. Under Maine’s new rate, a married engineer and sales manager earning $200,730 would pay $17,424, while the same couple would pay $10,237 in Massachusetts, $12,861 in Nebraska, $6,162 in Pennsylvania and $0 in New Hampshire. Before Maine’s tax increase took effect in 2017, the couple still would have paid $13,653 in state income taxes. Under the new rate, a married teacher and nurse anesthetist earning $215,190 in Maine would pay $18,892, while the same couple would pay $10,975 in Massachusetts, $13,850 in Nebraska, $6,606 in Pennsylvania, and $0 in New Hampshire. Under Maine’s 2016 rate, the same couple still would have paid $14,687.
In addition, Tax Foundation policy analyst Morgan Scarboro warned about the impact on businesses that file income taxes as individuals, writing in 2016, “As states try to foster economic growth through business-friendly tax environments, they should keep in mind that individual income taxes should be considered alongside corporate income tax rates. This tax increase would ultimately make Maine less competitive, giving Maine the highest top marginal individual income tax rate in the Northeastern region of the country.” Scarboro further noted that while Maine currently ranked 30th in the Tax Foundation’s Business Tax Climate Index, by passing the surtax, “It would drop to 45th overall, in the bottom ten for tax structures in the country.”
According to the U.S. Energy Information Administration (EIA), in 2014 Maine has just the 27th highest per capita energy use (309 million Btu) in the U.S., yet paid the 7th highest per capita energy cost ($5,681). While rates have flattened since 2010, electricity used in Maine households and businesses is the 11th most expensive in the nation. Further, while Maine’s industrial energy prices are competitive regionally, manufacturers look nationwide at where to keep or locate their operations. At 9.05 cents per kilowatt hour (kWh) average for 2015, Maine’s industrial electricity price was over 30 percent higher than the national average of 6.91 cents per kWh. In 2014, industry consumed 31 percent of Maine’s energy, two to three times more than the other New England states and far above the national average.
These higher prices cost Maine manufacturers millions of dollars in additional production costs compared to other states it competes with for industry investment (such as the forest products industry). Given that high-energy-using operations run on slim margins to profit, even small differences in electricity prices can deter them from locating or staying in Maine. As Governor Paul LePage said, “The more companies have to pay in energy costs, the less money they have for salaries and new jobs. If we want to attract and retain high-paying career jobs, we need to make our electricity rates more competitive.”
Under Governor Paul LePage, state funding for education has increased, even as the state has 10,000 fewer students than it did when the Governor took office. As a result, in inflation-adjusted dollars, state spending per pupil has risen from $6,066 in 2011 to $6,558 in 2016—an increase of 8.1 percent. Under the Governor’s 2017-18 budget proposal, even if student enrollment remained level, state per pupil spending would rise further, to $6,585. At the same time, Maine is only putting 59 cents of every dollar it spends on education in the classroom. This is below the national average of 61 cents per dollar.
Reforms, however, are already underway. As the Governor noted in this week’s address, “The state is now paying upfront costs of regionalization through its new program called EMBRACE. Maine Department of Education (DOE) Commissioner Bob Hasson is introducing a plan that will let communities create 9 to 12 regional centers. Services such as payroll, transportation, nutrition and professional development can be provided regionally at a lower cost.” DOE has also offered $3 million in grants for schools to create efficiencies. In just six weeks, DOE received 21 applications to deliver nearly $40 million in savings over the next five years. So far, DOE has awarded over $2.6 million, which is going to save about $17 million over the next five years.
By reducing administrative costs and making Maine’s education system more efficient, these reforms proposed and now being implemented by the Administration can go a long way toward achieving the Governor’s goal of putting 70 cents of every education dollar the state spends in the classroom.
Currently, two-thirds of Maine's electricity comes from renewable sources such as hydropower and biomass. However, these clean sources do not receive remotely close to the federal subsidy dollars that renewables such as solar and wind receive, for the amount of energy they produce. Wind and solar are also not nearly as efficient as hydropower and biomass. This preference for inefficient energy forms is one cause of the state's high electricity costs. In a 2016 address, Governor LePage confronted this costly problem and pointed to how policy would be improved: "Electricity producers should be paid market prices for the power they generate."
In addition, the Public Utilities Commission's decision to compensate owners of solar panels for the panels' installation – as well as for the transmission and distribution of excess energy they may generate – took Maine even further away from a fair energy market. These costs then have to be paid by others. As Governor LePage said, "The PUC is shifting the burden away from those who have the resources to afford roof-top solar installations and onto ratepayers, including low-income and elderly customers."
OPM 3% Surtax Report
The state economist recently completed a report on the effects of the recently passed 3% surtax. A summary of the report can be found here. The full report is available below.
Follow the link below to anonymously provide OPM cost saving ideas and areas within state government to evaluate.
Mission and Goals
The mission of the Governors Office of Policy and Management is to improve the performance of state government. OPM will help the Governor achieve long-term state economic goals by:
- preparing long-range economic projections
- offering improvements in the efficiency and effectiveness of government by analyzing the structure and functions of State Government
- delivering policy recommendations to improve financial management;
- assisting in developing economic goals by conducting studies and continuing economic analyses of the state economy
- advising the Governor, at his request, on the risks, costs, benefits, and effects on job creation and job retention of proposed legislation
- supporting efforts to receive federal funds by facilitating intragovernmental and intergovernmental coordination
To meet this mission, OPM will work to achieve three goals:
- Optimize government efficiency through innovation and collaboration.
- Prioritize services and improve equity across state government.
- Strengthen financial and fiscal management to better fund vital services.
- Improve accountability, transparency and accessibility.
- Improve public access to vital economic and demographic data and analysis.
- Enhance economic impact analysis of state government.
Barriers to Prosperity
The Governor’s Office of Policy and Management (OPM) is working directly with our partners at the Dept. of Economic and Community Development, Department of Labor, the Governor’s Energy Office and others to host regional meetings across the state to discuss the barriers Maine faces in becoming prosperous.
Meetings will consist of business leaders, chambers of commerce, education leaders and others around the state. OPM will provide a high level overview of Maine’s challenges and facilitate a discussion to hear directly from regional leaders about those challenges and others they may see.
As part of these regional discussions OPM encourages meeting participants to provide feedback on how Maine can overcome these barriers to prosperity. By clicking here you will be able to fill out a form giving us your ideas to address our challenges. Thank you for being part of our regional discussions.