The announced closure of the Verso Paper mill in Bucksport and the responses from the gubernatorial candidates provided a window into their views on the role of government and the Maine economy.
Jobs and the economy are always foremost in the minds of the public, but the Verso closure, along with the slow decline of the once-dominant paper industry, has emphasized the economic challenges facing Maine.
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More than 500 jobs may be lost in Bucksport. Retraining workers could be difficult given that the average age of a Maine mill worker is 58, according to the Maine Pulp and Paper Association.
An aging workforce also is a concern for other businesses. The number of prime working-age adults, those between 25 and 54, is declining, according to U.S. Census and Maine Department of Labor data. In 2013, deaths outnumbered births in Maine for the first time since the data began being collected in 1950.
The picture isn’t much better for those who are employed.
Although the state’s jobless rate has dropped to 5.6 percent from a 20-year high of 8.4 percent in 2010, Maine had the smallest rate of growth in real personal income among 49 states from 2011 to 2012, according to the U.S. Bureau of Economic Analysis. Maine showed growth of 0.3 percent in that period, to $38,516 in real per-capita personal income.
Maine’s median household income was the lowest in the 11-state Northeast region and 17th lowest among all states, Puerto Rico and the District of Columbia in 2013.
While projected growth in certain technology clusters offers hope, regional challenges persist. This summer the Bureau of Economic Analysis said the value of the state’s goods and services, or gross domestic product, increased by 0.9 percent in 2013, ranking Maine 41st in the country. In September, the bureau found that growth in the Portland metro area was 0.7 percent, while Bangor and Lewiston-Auburn were at 0.1 percent.
The statistics present a challenge for all three candidates, Republican Gov. Paul LePage, Democratic U.S. Rep. Mike Michaud and independent Eliot Cutler.
Where do the candidates stand? Find out on the BACK PAGE
Here’s a look at where the three candidates stand on key economic issues:
GOVERNMENT’S ROLE IN THE ECONOMY
How active should the state be?
State government plays a critical role in the Maine economy. It creates and amends regulations that directly affect business, including labor and permitting laws. It borrows money to fund major infrastructure projects or research and development. It creates and eliminates tax incentives. It backs loans to help finance business expansion. State educational mandates can affect business.
Even political fighting can affect business. In 2013, for example, Fitch Ratings Service downgraded the state’s credit rating, citing, among other things, “an increasingly contentious decision-making environment.”
MICHAUD said government’s role in the economy begins with investing in education to ensure businesses have access to a well-trained workforce. Saying the state can also boost the economy by investing in infrastructure projects such as roads, bridges, railroads, ports and increased broadband access, he supports robust state borrowing to advance an array of projects highlighted in his Maine Made plan. The plan includes several initiatives that would require public investment, including construction of a Maine Domestic Trade Center to help small businesses connect with markets outside the state, and a $100 million public-private investment plan that includes increasing broadband access, research-and-development funding, and energy and infrastructure improvements. “Government needs to be predictable and treat residents and businesses fairly, creating the level playing field for them to be successful,” he said.
LEPAGE often has said that government can’t create jobs, the private sector can. However, the governor does believe government has a role in job creation and retention, as evidenced by his comments and his first term in office. Alex Willette, the governor’s campaign spokesman, said LePage would continue to push efforts to lower Maine energy prices, create stability and level the “playing field in terms of regulatory structure, and then get out of the way instead of placing hurdles in front of businesses.” Willette said the administration’s welfare policy and tax-cutting strategy will “make Maine more competitive, and attract new residents, but also will incentivize employment with lower taxes.”
CUTLER’s view of government’s role in job creation sounds a bit like LePage’s – it can’t create jobs but it can partner with business – but his plan looks a little like Michaud’s, calling for investment in education and infrastructure. Cutler also emphasized job training, which he said is a bigger issue for employers than the state’s tax burden. He would reconstitute the Job Training Initiative forwarded by independent Gov. Angus King, but cut by Democratic Gov. John Baldacci and eliminated by LePage. The program supports new training methods for new workers, while retraining those who have been in the workforce longer. Cutler also is a strong supporter of expanding broadband access to help eliminate distance barriers for small businesses struggling to get access to new markets. Like Michaud, Cutler also favors investing in transportation infrastructure. He also backs promoting the Maine brand and expanding opportunities for local farms and fisheries. He said that “the right governor can be a state’s best salesperson and ambassador, or he can be an embarrassment like we have now.”
ECONOMIC DEVELOPMENT INCENTIVES
Measuring performance an issue
States are in fierce competition to lure and retain businesses, spending billions each year on tax incentives and other programs to achieve those goals. Maine provides about $1 billion in tax exemptions every year, including tax credits for companies investing in research and development ($850,000), Pine Tree Development Zone incentives for businesses expanding in Maine ($3.3 million) and fuel and electricity exemptions for manufacturers ($25.1 million). Its business reimbursement tax program will provide $81.2 million in tax breaks over the current two-year budget.
Business groups and elected officials say the programs are needed to keep Maine competitive with other states. Others question the efficacy and oversight of the programs.
LEPAGE’s campaign said that economic development incentives “are among the most visible economic development tools available to attract new companies, expansion and investment.” Willette noted that Panolam Industries specifically credited the Pine Tree Development Zone Program for its recent expansion and the creation of more than 120 jobs in Maine. In April, a report prepared for the state found that Pine Tree Development Zones delivered $358 million in benefits (salaries, people employed, sales, etc.) in 2012, but cost Maine taxpayers $457 million. Without providing specific data, the LePage campaign said the program created 5,000 jobs in 2012 and more than $420 million in private investment. The campaign did not respond to a question about whether the governor would back the state releasing aggregate data about how the program performed.
CUTLER said many of the incentive programs have been “on autopilot for years, never reviewed to see whether they still make sense and are a good investment.” He vowed to conduct a comprehensive review of the programs and said his administration would annually submit recommendations to the Legislature to either repeal or modify the incentive programs based on “fact-driven review and satisfaction of explicit measurements and strategic goals.” He specifically cited the Pine Tree Development Zones. Cutler said many of the companies receiving the incentive have never shown that they’re needed, “even though the law says they should.” He added, “Maine should be investing in programs that yield the highest financial rewards for Maine people, especially in terms of jobs and avoided costs, and that’s how these investments should be evaluated.”
MICHAUD agreed that the incentive programs are ripe for review and, potentially, change. “I believe that it is critical that we establish verifiable metrics for all economic development programs and that we be willing to update, change or eliminate programs that don’t work while at the same time investing more in programs that do work,” he said. Michaud also hedged slightly, saying it’s difficult to judge economic development programs. “Businesses have told me directly that without Pine Tree Zones, they would not have been able to expand their businesses in Maine,” he said. He added, “I’m not an ideologue. I’m someone who looks for solutions, regardless of the source of the idea. If there is evidence that Pine Tree Zones or other programs don’t work, then we need to eliminate them or improve them.”
LOSS OF PAPER MILLS, JOBS
Dealing with a declining industry
The scheduled shutdown of the Verso Paper mill in Bucksport means that the Maine pulp and paper industry will lose three mills this year.
Since 2000, the number of paper mill jobs in Maine has fallen from about 12,850 to 6,900, according to Maine Department of Labor statistics. By 2020, the number of mill workers is expected to be down to 5,200, according to the Labor Department.
Analysts told the Portland Press Herald that the shutdowns are part of a trend that’s expected to continue over the next 10 to 20 years because of a decline in demand for Maine’s paper products and high energy costs.
MICHAUD has touted his plan to stabilize the manufacturing sector, including a moratorium on the scheduled transfer to a new business equipment reimbursement program, reducing energy costs through natural gas expansion and creating a stabilization fund to cushion the blow for future mill closures. He also cited unfair trade policies, such as the North American Free Trade Agreement, which he said has created a competitive disadvantage. “There’s no question that Maine’s paper and wood products industry has gone through tremendous – and damaging – changes,” he said. “We can’t be nostalgic for the past. The world has changed and Maine has suffered.” He said the state could find a new course for the industry. For now, he said the state needs to create “more predictability and stability for business.”
CUTLER said the state can help the paper industry by lowering energy costs through the expansion of natural gas and promoting research and development that could aid the future transition of the mills. He said the state should have been making efforts to prepare for the inevitable decline in paper demand. “The handwriting has been on the wall for (a) long time,” he said. “… Instead of thinking of these facilities just as paper mills, we need to look at them, and market them, as a collection of valuable assets: skilled workers; access to low-cost power (hydro in Millinocket, gas and biomass in Bucksport); abundant wood fiber resources; proximity to large Northeast markets; and road, rail and ocean access.” Cutler has proposed that the state buy the energy generating assets at Verso to provide low-cost power to other businesses.
LEPAGE’s campaign said the “paper industry is and will continue to be critical to Maine’s future,” but it didn’t say how the state should move forward. “Bad public policy over the past 40 years has caused the industry to experience hardship,” Willette said, “The lack of capital investment has hindered the industry’s ability to be at the cutting edge of technology and be cost competitive in a global market. Additionally, Maine’s tax structure and high energy costs have directly hurt the bottom line of these companies.”
BARRIERS FOR PROSPERITY
State faces numerous challenges
The candidates have a range of views about obstacles facing Maine and its economy.
CUTLER said the biggest concern for business was a dearth of qualified workers. “More than tax breaks or other incentives, skilled workers and a first-class educational system are what will keep businesses here, help them grow and draw new businesses to Maine,” he said. Cutler views natural gas expansion as a bridge fuel while the state pursues renewable energy solutions. He has proposed creating a Maine Energy Finance Authority within the Finance Authority of Maine to provide low-cost capital for energy projects. Cutler also believes the state has successfully reformed the workers compensation law and that he would veto efforts to roll back current rules. On the minimum wage, Cutler said in February that he wouldn’t have vetoed a 2013 bill to increase the minimum wage to $9 an hour and tied future increases to inflation. However, he has said that any increase in the minimum wage needs to be part of a larger strategy to improve the educational system and the health of Maine workers. He’d also prefer that the federal government initiate a minimum wage increase.
LEPAGE has been critical of efforts to raise the minimum wage and vetoed the 2013 bill. At a debate in Waterville last week, he said he’d go along with a federal increase, a position that puts him on the right side of public opinion polls. However, he believes that Maine should aim higher. “I am so tired of hearing minimum wage. How about optimum wage? How about living wages? … That’s the jobs I’m going after. Minimum wage – I’ll leave that up to my opponents,” he said during a debate held in Portland last week. During a televised debate Wednesday, LePage said his job-creation priorities are making Maine a right-to-work state, a change vigorously opposed by labor unions, which say the laws are anti-union and drive down wages (Michaud and Cutler both oppose right-to-work laws). As for economic development barriers, LePage has cited energy costs. His campaign said, “Maine needs to have a fair and consistent regulatory environment. Let’s not change rules midstream and let’s find a way to partner with the private sector, not be an adversary.”
MICHAUD said that LePage has created instability and driven away investment, and that Maine’s tax structure is unbalanced. He doesn’t support Cutler’s plan to change or eliminate sales tax rates and exemptions. He said Maine’s energy prices hurt manufacturing, and he supports natural gas as a transition fuel to help companies compete regionally and globally. Michaud noted that the staff at the Public Utilities Commission has said that natural gas expansion could cost Maine ratepayers $75 million annually, if the agency decides to commit to public investments in new pipelines. “I’m not opposed to using a ratepayer subsidy as long as there is a reasonable guarantee that the investment would lower energy costs for consumers and lead to price stability,” he said. “With so much public money at stake – both in terms of the investment involved and the impact on energy prices – we need to be as transparent and accountable as possible.”
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