Governor Janet Mills earlier this month released her 10-Year Economic Development Strategy for the state, the first undertaking since 1993. While well-intentioned, the plan outlines broad policy ideas for lawmakers to consider without any indication of how much they would cost or how they would be implemented. Some of the major goals include adding more than 75,000 individuals to our workforce, increasing wages by 10 percent and raising the value of products sold per worker by 10 percent.
While these are goals worth pursuing, Mills’ economic development strategy is more a costly wish list than a realistic path forward.
Maine Career Exploration
The first idea outlined in Mills’ plan is called Maine Career Exploration. The basic idea of the program is to work with children from kindergarten to one year post-graduation to explore career opportunities in their areas of interest. One facet of the program is to ensure all Maine students have a six-month paid internship between their junior year of high school and one year after they graduate. In order to connect students and employers, the plan suggests creating a new web portal to simplify the process of finding an internship or apprenticeship program.
But lawmakers should use caution if the program involves new mandates on employers or large expenditures. The details surrounding this policy idea – and many others in the governor’s plan – are sparse. Would there be a requirement that all employers participate in the program, or set sums all interns must be paid? Such a program would also likely increase the per-pupil cost of education in Maine. In 2017-2018, the average per-pupil cost for 178,480 Maine students was $13,863 annually. If the program includes a minimum wage for interns and new mandates for employers, it may create a more unwelcoming environment for business.
Another idea in the plan calls for the establishment of micro-credentials to allow students to achieve “credentials of value.” According to the plan, these credentials would be transferable between Maine’s community colleges, universities and adult education programs. Governor Mills claims they would allow individuals to increase their income potential.
Again, the plan is relatively vague, but constructing new barriers to entering the workforce would further harm Maine’s economy. The state’s current licensing regime already creates significant barriers to entry, especially for women and individuals with lower incomes. If these micro-credentials become necessary for specific Maine jobs or education opportunities, it could harm the state’s ability to attract new workers.
Lawmakers would also need to consider how small the credentials are tailored and the method by which competency is measured. Put simply, state government should be making it easier to earn a living in Maine, not constructing new barriers under the guise of self improvement.
Salary Supplements for Early Childhood Educators
Mills’ plan suggests providing salary supplements to early childhood educators. She argues that these individuals are some of the lowest paid workers in the education field, leading to high turnover rates, low quality childcare and less continuity. This initiative would be costly to taxpayers if undertaken by the state.
According to 2018 data from the Maine Department of Labor, the average preschool teacher makes $17.09 per hour. If the state were to supplement preschool teachers’ wages to make $20 per hour, it would cost approximately $8.6 million annually. This estimate assumes these teachers are paid 40 hours per week for 52 weeks and excludes special education teachers. Similarly, the average childcare worker is paid $12.02 per hour. If wage supplements were issued to boost their wages to $15 per hour, it would cost the state approximately $17.54 million annually.
Governor Mills will use the Maine Children’s Cabinet to create a long-term plan to create a universal preschool system for children from birth to age four. She argues this will attract new Mainers and allow some who are already here to enter the workforce. Of course, a universal preschool program would create a large expense for taxpayers. According to a Portland Press Herald article, the program would cost approximately $40 million annually.
Another issue is the effectiveness of universal preschool programs. While short-term effectiveness is typically positive in contemporary research, preschool programs across the country have not been proven to increase the long-term cognitive ability of children. In fact, it was found that when children gained statistically significant improvements during preschool years, these gains faded when they entered kindergarten and first grade. Further, a literature review conducted by the Brookings Institute on the long-term effects of preschool revealed that “improvements in learning are detectable during elementary school, but studies also reveal null or negative longer-term impacts for some programs.”
The Education Opportunity Tax Credit
A liberal economic plan wouldn’t be complete without expanding the extent to which the government will pay for student loans. Mills’ plan would extend the Education Opportunity Tax Credit to more people to encourage them to move to Maine. Currently, there are requirements regarding what year students went to school, their majors and where the school is located.
According to Maine Revenue Services, approximately 5,500 individuals currently receive this credit. In 2019, this resulted in $24,900,000 in lost revenue. The revenue loss in 2021 is projected to be $35.1 million. If this program were to be expanded, it would likely accumulate more graduates who would claim the credit, thereby reducing state government revenue by tens of millions of dollars. Don’t let this backwards plan fool you — instead of paying for individuals’ student loans outright, this initiative would just reduce their tax liability while others continue to shoulder the burden.
By offering tax credits to select individuals, policymakers obviously recognize the benefit of lower taxes. Instead of providing narrow carve outs, lawmakers and the governor should provide benefit to everyone by cutting taxes across the board.
There is one idea in Governor Mills’ agenda that would benefit Mainers. According to the plan, she wants to streamline the process of recognizing licenses issued internationally, by the military and by other states. The goal of this initiative is to ensure Maine is known as a place where individuals can obtain good jobs that match prior skills.
Representative John Andrews introduced similar legislation, LR 2864, earlier this year that would have recognized out-of-state licenses as long as applicants were in good standing, practiced in their profession for at least one year and paid associated fees. Despite its support on both ends of the political spectrum, it failed to receive enough affirmative votes to be considered in the upcoming session.
Arizona and Pennsylvania were the first states to pass universal recognition bills earlier this year. According to the Deputy Director of the Arizona Board of Behavioral Health Examiners, the state had more than 139 pending applications from out-of-state licensees wanting to work in Arizona. In addition, she indicated the board is receiving more applications than they would otherwise. Similarly, Pennsylvania’s Department of State said more than 28 individuals have received a license as a result of their new universal recognition law that became effective this year. If Maine adopted a similar law, it would be far easier for workers to move here from out of state and continue working in their desired profession.
Governor Mills wants to increase research and development (R&D) investment levels with public subsidies, tax incentives and higher education investments. According to the plan, the state currently spends 50 percent less on R&D than it did in 2009. More specifically, $483 million was allocated to R&D in 2016 whereas about $757 million was spent for that purpose in 2009. According to the Maine Economic Growth Council, the “benchmark increase” would be 375 percent from the current level of 0.8 percent to 3 percent of Maine’s GDP, or a total of about $1.55 billion. An increase of this magnitude would be unrealistic without substantial cuts to other state government programs.
Mills’ plan would also increase the ceiling under the Seed Capital Tax Credit Program from $5 million to $15 million. This credit is worth up to 50 percent of investors’ income tax liability, except for investments made through venture capital funds after 2011, which are fully refundable. However, not all investors are eligible; the requirements for the program are as follows:
- Investments can be used for fixed assets, research or working capital
- The investment must be at risk for five years
- The investor must own less than 50 percent of the business
- The business’ gross sales must be $3-5 million or less per year, depending on the year the investment was made
- The business must be located in Maine
- The principal owner(s) must work at the business full-time
- The business must be a manufacturer, value-added natural resource enterprise, or a product or service provider with 60% of sales derived from outside the state or to out-of-state residents, or is engaged in developing or applying advanced technologies
Only 210 taxpayers take advantage of this program annually and state government is projected to lose $4.5 million as a result of it in 2021. Again, instead of creating niche tax incentives for small cohorts of the population, lawmakers and the governor should consider lowering the income tax for all Mainers.
The Finance Authority of Maine (FAME) would provide loan guarantee insurance to private lenders who issue funds for high-speed internet providers. According to the plan, the reserves required to support a private high-speed internet investment would be 20 percent of the total investment. Governor Mills admits the upfront cost of this policy idea would be large but believes it would pay for itself once payments start to roll in.
While expanding broadband to all Mainers is a laudable goal, it is not state government’s role to offer insurance on loans or to provide broadband infrastructure grants. Instead of handing out funds for broadband investment, lawmakers and the governor should pursue policies that make Maine a competitive destination for private broadband investment.
Another facet of the governor’s plan is to review and document Maine’s regulatory processes. State officials would look for areas in regulation that are repetitive and find methods to improve efficiency. Once these processes are streamlined, the state would create an online portal for permit applicants to track their applications, giving businesses information about how long a process may take, the standards they should meet, and other information.
While a worthwhile undertaking, this policy did not need to be included in her 10-Year Economic Development Strategy. In fact, Governor Mills could have started this process the day she assumed office; she does not need legislative approval to remove rules and regulations created by the executive branch. Nonetheless, if she is serious about this process, it could become a little easier to start and maintain a business in Maine.
Several initiatives outlined in Governor Mills’ 10-Year Economic Development Strategy would be costly and do little to attract workers, increase their wages or boost their value to businesses as intended. Instead, Governor Mills’ wish list would drastically increase spending, likely calling for new taxes in the process.