New England is beautiful, but it is broke. Income inequality is a severe problem in Massachusetts and Connecticut. Rhode Island’s state pensions continue to take on water. Only two New England states (Maine and New Hampshire) enjoyed growth of two percent in the first quarter of 2016. The poor economic outlook for the region could explain why, since 2005, almost every state in the region has lost population, on net.
The path to change, however, sometimes begins with merely a good idea.
The American Legislative Exchange Council (ALEC) Center for State Fiscal Reform recently released the second edition of its annual publication, State of the States. Originally conceived as a comprehensive glossary of each governor’s economic vision for his or her state, the best vehicle for cataloguing that idea in a uniform manner was through state of the state addresses. After all, since ALEC is a legislative membership organization, there is hardly a better format to track executive proposals than when that executive addresses the legislature directly.
This year’s edition of State of the States is more robust than the inaugural edition, containing more analysis and featuring an examination of the best and worst addresses. In a surprising turn and despite the region’s generally poor economic policies, two New England governors distinguished themselves enough to qualify as “best of the best:” Connecticut Governor Dannel Malloy and Maine Governor Paul LePage. Malloy’s address focused on sound spending and budget reform, and LePage’s on tax reform and getting government out of the way of Mainers.
The similarities, though, end there.
Malloy’s time as governor of Connecticut has been one long lesson in “what not to do.” Despite having formerly been known as a fiscal moderate while serving as the mayor of Stamford, Malloy went off the fiscal rails after assuming statewide elected office. No spending program was too big, no tax hike too onerous. Under Malloy’s watch, Connecticut broke records for tax hikes during multiple legislative sessions and continuously failed to reign in its budget or slow the growth of government. As such, Connecticut is among the worst states in the nation for pension funding ratio and per capital pension debt. The state has also become anti-business, a regulatory minefield that scares off entrepreneurs and established corporations alike. Since Malloy took office, Connecticut has dropped more than ten spots for economic outlook and now ranks a dismal 47 in the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index.
However, Malloy’s shift in rhetoric might be indicative of a few things. Perhaps Malloy is returning to his roots as a fiscal moderate. Perhaps he is striving to protect his legacy. Perhaps the sting of losing General Electric has shaken him awake. Regardless, it will be interesting to see whether Connecticut’s downward spiral stops under his watch, though there are currently no indications that he will be able to get his reforms passed.
Up in the Pine Tree State, however, Governor LePage is leading the charge to stop the tax-and-spend fiscal cycle. While Malloy was once known by Connecticut residents as a fiscal moderate who tacked left, LePage’s trademark is economic consistency: he wants to cut taxes and shrink government. This desire could hardly be more clearly stated than in the letter to the Maine State Legislature LePage sent in lieu of a delivered address.
LePage rejected calls for raising the state minimum wage, a known job killer:
“Rather than debating a minimum wage, I want to give a pay raise to all working Mainers: eliminating the income tax will put $900 million back in the paychecks of Mainers. It’s the biggest wage increase they can get.”
Beyond that, LePage called for eliminating the estate tax, which is notorious for making life difficult for small, family-owned businesses, particularly farms. Death taxes, as they are also called, encourage individuals to leave the state. If these taxes are reduced or phased out, Mainers who split time between the North and Florida will have less incentive to make states like Florida (which has neither income nor death taxes) their permanent residence.
LePage’s tenure as governor of Maine has put the state on an opposite trajectory from that of Connecticut under Malloy. When LePage took office, Maine’s economic outlook was ranked 48 out of 50 states in Rich States, Poor States. However, LePage emphasized pro-growth, pro-taxpayer reforms, as well as reforming wasteful spending. Thanks to reforms passed under LePage during the 2015 legislative session, Maine qualified for 2016’s State Tax Cut Roundup, joining growing states like Texas, Arizona and Florida. Overall, Maine has gone from 48 in economic outlook to its highest-ever ranking of 38 in the newest edition of Rich States, Poor States.
Looking at the two addresses, it is easy to see that these governors have some good ideas. And, while noted before, sometimes a good idea is a start. However, good ideas paired with action, commitment and will, always trump a mere “mea culpa.”
That is why LePage’s style of leadership has been better for Mainers than Malloy’s has been for Nutmeggers.