In February the Maine Economic Growth Council issued its annual assessment of the Maine Economy, entitled Measures of Growth, - “Performance Measures and Benchmarks to Achieve a Vibrant and Sustainable Economy for Maine”.

Overall, the Report notes that Maine has experienced little economic growth since the publication of last year’s report.  The key indicator here is growth in per capita personal income (total income earned in the state divided by the state’s population).  Maine’s grew a little, but fell in comparison to the rest of the country.  Maine went from 33rd to 37th.  In addition, Maine had zero job growth.  That’s correct, zero job growth.

Moreover, the Growth Council “red-flagged” (for particularly poor performance ) five other areas: Research and Development Expenditure, Manufacturing Productivity, Transportation Infrastructure, the Cost of Health Care. and the State and Local Tax Burden.

Research and Investment expenditure is one of the important indicators of the ability of the state to adapt to an innovation-driven or knowledge economy.  The King administration, in an assessment of what drives economic growth in other states, found that economic growth is directly correlated to two factors:  Research and Development expenditure and the state’s number of college graduates.   Thus, Maine’s declining R&D expenditure is particularly disappointing. I should also note that, although the Growth Council does not track numbers of college graduates, Maine’s performance on this measure significantly lags the rest of New England.

In Manufacturing Productivity, another of the red flags, Maine improved but not nearly as rapidly as the rest of the United States.  In Transportation Infrastructure Maine continues to lag significantly behind the rest of New England in the road and bridge conditions necessary to support commerce.

Another red flag went to health care costs where Maine’s costs continued to grow significantly faster than the U.S. average.  Where the rest of the country spends 13.4% of gross domestic product (GDP), Maine spends a staggering 18.5%.

The result of all these costs is no surprise.  The Council’s final red flag went to Maine’s overall tax burden, at 13.5% the highest in the Nation, according to the Tax Foundation.

This disturbing picture of a state in decline echoes much of the data used by the Brookings Institution in its study of the Maine economy completed late last year.  Brookings, you may recall, called for a multi-pronged effort to try to revive Maine’s economy.

As Brookings points out, action is needed on two fronts. First, selective investment to solidify the “Maine brand” and to strengthen our fledgling attempts to build an innovation economy. Second, reductions in state and local spending to reduce the enormous drag on the state’s economy that comes from high public sector costs and the overall tax burden.

The bond package agreed on by the Governor and the Legislature includes $55 million for R&D investment and is an initial step toward the investment side of the equation. The school consolidation plan put forward by the Appropriations Committee is a small but significant step at reducing costs. What more needs to be done? First and foremost the state must more forcefully address Medicaid costs, the largest and one of the fastest growing expenditures in state government. Recently proposed actions to control these costs are too limited. Benefit levels are out of line with what we as a state can afford. Other states similar to Maine have reasonable programs at much lower costs.

Second, we must agree on an approach to systematically review and reduce other areas of state expenditure. This was flagged by the Brookings Report as a priority, but the Governor has responded in only a limited and ad-hoc way.

Economic growth creates jobs, opportunity, and income.  We must improve our economy if we want a Maine in which our children have the opportunity to raise their children in this state.  The choice is ours, the blueprint is there.   Who is going to step up to this challenge?