Illustration by M. Scott Ricketts
Cleaning Up Maine’s Mess
While academics pontificate and politicians ruminate, the real-world members of the LePage administration continue to do the dirty work of dealing with Maine’s economic mess.
The May issue of Maine Ahead included an article by retired professor Orlando Delogu entitled “Pension Shell Game.” Among other points, he dismissed the gravity of the huge $4.1 billion debt owed by Maine taxpayers for teacher and state employee pension benefits. The emeritus professor taught environmental and land use law at the University of Maine for over 40 years.
Professor Delogu stated that the most critical component of Maine’s public debt simply had a “cash flow” problem. For those of us having worked a lifetime in the private sector, we know that the lack of cash flow (money) is an extremely serious issue. Maine state government has a nagging cash flow problem that prevents adequate funding of core programs and services, while still paying off its $4.1 billion pension debt.
Anemic cash flow is why Maine’s past administration wasn’t able to balance the state budget for years without gimmicks. To “balance the books,” it used unpaid furlough days and one-time stimulus money from Washington, and failed to pay our hospitals the funds they were owed. The debt crisis in Washington was created by fiscally-reckless career politicians, who spent far more than the country was taking in for many years. Now the feds don’t have enough cash flow
to pay the interest on the $14 trillion national debt, while still funding bloated government programs and services.
To make Maine’s cash flow problem even worse, Washington cannot solve its spending and debt addiction without reforming Social Security, Medicare, and Medicaid. These behemoth entitlements consume 43% of every federal tax dollar spent, and growing. Reforming them will likely mean less federal money heading to Maine—less cash flow to pay our bills. Fiscal imprudence at the top runs downhill to affect all of us.
Professor Delogu’s dismissal of the financial importance of cash flow didn’t help address the monster $4.1 billion pension debt. Real-world financial experience did. Retirement benefit reforms passed by the legislature and signed by Governor Le-Page eliminated $1.7 billion of this daunting debt. This, in turn, reduces taxpayer spending by roughly $200 million per year for the next 17 years until the debt must be paid off. The state government’s cash flow is now stronger. More money is available to strategically invest elsewhere to help create jobs and keep our kids here.
In the July/August issue of Maine Ahead, Professor Delogu authored another article entitled “Less Political Rhetoric, More Straight Talk.” In this piece, he more broadly criticized the debt reduction, spending cuts, tax cuts, regulatory changes, and welfare reforms being implemented by the new leadership team in Augusta. Is the opposite direction being taken by Washington the right course? We know it’s not. And, the Standard and Poor’s credit rating agency and stock investors around the world have come to the same conclusion. There’s no substitute for practical business and economic experience to solve real world fiscal and job problems. That’s what the people of Maine are counting on in state government.
Over the past 35 years, our elected officials have created an expensive and complicated state in which to live and operate a company. Our businesses are encumbered with high taxes, stifling regulations, growing public debt, and draining energy and health insurance costs. These impediments discourage entrepreneurs from investing their capital in Maine to start or expand a business, and to create jobs.
From 1999 to 2009, a net 56 new private sector jobs were created in Maine. Fifty-six in a decade! In 2010, Forbes magazine listed Maine as having the worst business climate in the country. Fifty—dead last. The median household income just across the border in New Hampshire is $19,000 per year higher than here in Maine. The 2008 U.S. Census shows that only 10,951 Maine households out of our population of 1.3 million earned more than $200,000. In New Hampshire, a state with essentially the same population, the number is 23,710 households. It’s no wonder why our kids continue to leave for better opportunities elsewhere.
Last November, this embarrassing reality ushered in new leaders to fix the mess in Augusta. Not academics who live in theoretical worlds, or career politicians who focus on the next election. Rather, skilled business professionals with years of real-time experience creating jobs. Entrepreneurs who know what it’s like to put their own money on the line, and to be held accountable. Private sector people who understand that performance equals success.
Our new leadership team in state government is working nonstop to change the way Maine operates. Our goal is to build a business-friendly climate to attract capital investment and jobs. This will generate more tax revenues to pay for government programs and services. A fiscally disciplined government that spends less, taxes less, regulates less, and borrows less will help us get there. It’s common sense, and it works.
This transition to a brighter future in Maine will continue to be painful, but necessary. The cold, hard truth is that there’s no silver bullet to save us. The changes will threaten the status quo. The naysayers will make lots of noise. But we have a generational chance to get this right. We need everyone’s help and support, including that of Professor Delogu.
This is going to be tough. We can do this. We’re Mainers.
Bruce Poliquin is Maine state treasurer. His comments are as state treasurer, and not as a trustee of the Maine Public Employees Retirement System.
You must log in to post a comment.