Maine’s Real Unemployment and Jobs Picture Reflects Continuing Challenges for Maine Workers

Over 90,000 Mainers are still struggling to find work according to data released Friday by the Bureau of Labor Statistics. A stubbornly large number of part-time workers who want more work but can’t find it is driving this trend.

The “U6” alternative measure of unemployment, which accounts for unemployed workers who have recently stopped looking for work and workers with part-time jobs who want more work but can’t find it, was 12.8% for the 12-month period ending on June 30th, 2014. The national rate was just slightly higher at 12.9%. While Maine’s rate is just below the national average, it continues to fall at a slower rate than the rest of the nation as a whole.

Maine’s U6 is the 19th highest in the nation, driven by 40,300 “involuntary” part-time workers: those who want more work but can’t find it. These workers account for 6.1% of Maine’s 663,400 employed workers—the sixth highest rate of involuntary part-time employment in the nation.

This comprehensive unemployment data is important to keep in mind in light of the normal monthly jobs data releases from the Maine Department of Labor and related press releases from the Governor’s Office.

The June jobs report, released two weeks ago, showed that overall Maine’s labor market is improving along with the nation as a whole. The state’s unemployment rate continued to decline. In June 2014 it was 5.5 percent compared to 5.7 percent in May and 6.7 percent in June 2013. Nationally, the unemployment rate in June was 6.1 percent compared to 6.3 percent in May and 7.5 percent a year ago.

The LePage administration has emphasized the fact that Maine’s unemployment rate has declined significantly over the past two years, claiming that its policies are responsible for the improvement. The reality though, is that Maine’s economy is thoroughly integrated with the national economy, and both Maine and the US unemployment rates have declined slowly since the end of the recession. As with the U6 measure, the US rate of decline in unemployment has been somewhat faster than in Maine, although the US rate also climbed to a higher level in the wake of the recession.

As noted previously by MECEP and the Boston Federal Reserve Bank among others, the standard unemployment rate fails to capture other important labor market trends. The monthly unemployment rate does not account for unemployed workers who have dropped out of the labor force due to a lack of jobs. For this reason, the employment-to-population ratio, which accounts for all workers as a share of the total adult population provides a useful alternative. By this measure, Maine’s labor market recovery looks better: Maine has experienced one of the largest increases in the employment-to-population ratio of any state, though it remains well below pre-recession levels. But digging deeper into the data again reveals concerns and suggests that the labor market recovery is far from complete: most of the increase in the employment-to-population ratio seems to be driven by older workers who have either reentered the workforce or are working longer, and those “involuntary” part-time workers described above. The employment rate for prime-working-age Mainers—those who are most likely to be raising families—didn’t improve at all from 2009 to 2013. On that measure, Maine’s recovery isn’t much different from the US.

What about job growth? Here too Maine is showing signs of improvement, but clearly lags the nation. Based on MECEP’s analysis of the June jobs report, Maine has recovered 63% of nonfarm payroll jobs lost during the recession. By comparison, the US has recovered 106% of jobs lost during the recession and New England has recovered 116%. Our job recovery ranks 42nd among the fifty states and Washington, DC. The job growth that is happening is disproportionately centered in Portland, with small-town and rural Maine gaining few new jobs.

Maine Job Watch - June - FINAL LARGE

As we’ve written before, for an accurate understanding of the real strength of Maine’s recovery, one must view the monthly jobs and unemployment statistics in the context of longer-term trends both in Maine and nationally. Last week’s release of quarterly data on comprehensive unemployment, including “involuntary” part-timers, is important in this respect. Overall, Maine continues to show signs of improvement along with the nation as a whole. But weak spots remain and a full recovery from the recession, which ended five years ago, remains elusive.

General Assistance directive is penny wise, pound foolish

This June, Governor LePage directed municipalities to stop giving General Assistance funds to undocumented immigrants or risk losing state funding of General Assistance. While LePage may tout this instruction as “welfare reform,” the reality is this directive is bad for Maine citizens and immigrants alike.

In order to prevent illegal immigrants from receiving General Assistance, municipalities would have to demand proof of citizenship from everyone applying for General Assistance. As Janet Mills, Maine’s Attorney General, stated in her response to LePage’s new rule: “people who seek General Assistance—the person fleeing domestic violence, the victim of human trafficking, the asylum seeker awaiting federal approval, the family who lost their home to fire or to war—are least likely to have this paperwork on hand during a crisis.” Requiring documentation wouldn’t just leave out undocumented immigrants, many of whom are trying to obtain asylum status or waiting for their visas to be renewed. Asylum seekers have traveled to the United States because of fear for their personal safety in their home country. The documentation requirement would also hurt some desperate Mainers and legal immigrants, who, due to the extenuating circumstances that force them to see General Assistance, are unable to obtain proper documentation.

Cutting undocumented people from General Assistance will not only result in the exclusion of people legally residing in Maine from receiving help. It will also result in an increase in homelessness and hunger. A 2009 study suggests that homelessness actually costs the state about $1,300 more than it does to house people long term. Homelessness and hunger often end in job loss, illness, and increased medical needs, all of which diminish the ability of people previously receiving General Assistance to stabilize their finances. Taxpayers, if the people are uninsured, will shoulder the medical costs and the economy will suffer for the long-term job loss.

In a Portland Press Herald interview about the issue, Portland resident Chris Torlone said, “I really do think that everyone does have a right to that kind of help. They’re still a human being. You don’t need a document to be a human being.” Financial logic agrees with Chris’s view. Compassion isn’t just humane—it’s also economical.

Federal Court Decisions Could Impact Mainers’ Healthcare in Future

For the moment, people who have affordable coverage as a result of tax subsidies—including an estimated 39,000 Mainers—have nothing to fear. But two federal appellate court decisions have set the stage for the U.S. Supreme Court to hear a challenge to the subsidies.

Yesterday, the U.S. Court of Appeals for the District of Columbia Circuit ruled to drastically limit the number of Americans who could qualify for federal subsidies when purchasing a private healthcare plan. Just hours later, the U.S. Court of Appeals for the Fourth Circuit, upheld the subsidies for all purchasers. Both decisions will have to make their way through lengthy appeals processes.

If the subsidies ultimately fall, it could be a major impediment to implementing the Affordable Care Act (ACA). It would also hurt Maine’s economy, leaving large swaths of Mainers unable to afford coverage.

Here’s what the rulings say, the potential impact for Mainers, and what is likely to happen next.

The Decisions

The ACA aimed to broadly expand access to health insurance in two ways.

First, it sought to expand Medicaid access to anyone making less than 138% of the federal poverty level (FPL). In its 2012 decision upholding the law, the U.S. Supreme Court ruled that Congress had overstepped its Constitutional authority in mandating the expansion, leaving the decision to expand Medicaid to the individual states. Maine is the only state in New England to not expand Medicaid – guaranteeing that at least 32,000 Mainers have no affordable coverage option and that the state is missing out on almost $1,000,000 in federal funds every day.

Second, the ACA established subsidies—by way of tax credits—to anyone making less than 400% of the FPL who purchased a health plan on exchanges “established by the State.” Both opinions focus on those four words. The IRS had broadly interpreted the words to apply to any person who had purchased a plan on a healthcare exchange—regardless of whether it was run by a state or the federal government.

The D.C. Circuit disagreed, ruling that the subsidies would only be available to those who had purchased their plan on an exchange literally “established” by their state. The Fourth Circuit, on the other hand, found the broad IRS interpretation “permissible.”

The potential implications for Maine

Currently, only 14 states have established their own exchange, and Maine is not one of them. This means that if the subsidies are ultimately struck, many Mainers would be left paying the full cost of their premiums.

According to the Department of Health and Human Services, 89% of the 44,000 Mainers who purchased plans on—or more than 39,000 people—would no longer qualify for the subsidies. The average subsidy in Maine cuts premiums for Mainers from $443 a month to $99—a 78% reduction. Thus, the average Mainer would pay an additional $344 a month for health insurance without the subsidy.

And the gap would only grow. Estimates from the Robert Wood Johnson Foundation’s Urban Institute suggest that the number of Mainers qualifying for subsidies will grow to 55,000 by the beginning of 2016. The loss of subsidies would cost the Maine economy nearly $280 million dollars per year.

If the subsidies are ultimately cut (and Maine does not create its own exchange), many families may lose the health insurance they were just recently able to afford and could potentially be forced to pay a penalty for not having coverage. In this light, these cases have the potential to be a double whammy for some Maine families just as new evidence suggests the law has helped to alleviate inequality nationwide.

Next Steps

Both opinions rest on statutory interpretation. Thus, the simplest solution would be for Congress to amend the ACA to make clear that the subsidies apply to all states, regardless of exchange system. However, given the partisan divide over this issue, it is almost impossible to imagine the Republican-controlled House of Representatives—a body that has repeatedly voted to repeal the law—passing a law that would shore up the ACA.

Instead, the case will likely find resolution in the courts. Before the Fourth Circuit announced its decision, the White House has said that it will appeal the earlier decision, asking the entire D.C. Circuit—instead of just the 3-judge panel—to rehear the case. Until recently, the D.C. Circuit and the Fourth Circuit were famously conservative. But in a showdown last year, Senate Democrats amended the filibuster rules in order to confirm three of President Obama’s appointees to the D.C. Circuit. Only active judges may rehear cases, and currently, the tally on the D.C. Circuit stands at 7 Democratic appointees to 4 Republican; the Fourth Circuit has 9 Democratic active appointees and 5 Republicans.

While political affiliation is not a perfect indicator of how a judge will rule on this issue, yesterday’s opinions—two Republican votes to strike the subsidies and 4 Democratic votes to uphold—suggests a potential correlation.

As of this posting, the White House has yet to say whether it would change its legal strategy given the Fourth Circuit’s opinion. However, the U.S. Supreme Court—which has discretion on which appeals to hear—almost always takes cases where federal Courts of Appeal have reached opposite conclusions. Predicting the outcome of Supreme Court cases is always tricky, but some legal scholars argue that the Fourth Circuit’s reasoning is more sound.

The bottom line is that at this moment, nothing has changed with regard to subsidies for health insurance. And at least for the foreseeable future, that will remain the case.

Flexible workplaces are good for Maine workers and Maine’s economy

Workplace flexibility policies would benefit Maine’s working families and its large population of senior workers as well as its economy. Workplace flexibility means the acceptance of adjustments to the 9-5, 40 hour in-office work week, and could include accommodations like: flexible hours; paid vacation, sick, and parental leave; job sharing; telecommuting. Maine legislators should consider legislative initiatives either to establish such policies or to incentivize employers to take the initial leap toward increased flexibility. More family-friendly workplace rules will provide Maine employers a competitive edge and a much-needed relief for Maine workers.

Today’s workforce is much different from the workforce of the 1950’s. Workers are retiring increasingly later and women are moving from the secretary desk to the corner office. Unfortunately, the workplace hasn’t changed to match the new workforce’s needs. The standard American workplace is the same now as it has been since the end of World War II: nine to five, five days a week. No federal law mandates paid vacation time, paid sick leave, or paid family leave. Nor are these benefits required in Maine. Workforce diversity can enable a larger, stronger economy—but it has also created a diversity of accommodative scheduling needs. Increasingly, even more traditional young male workers are sharing family responsibilities with their partners. The one-size fits all workplace has become antiquated as the workforce has grown more robust.

The need for workplace flexibility is beginning to garner attention. In June, President Obama advocated for workplace flexibility, telling the White House summit on working families that such policies “are not frills, they are basic needs…They should be part of our bottom line as a society.” Savvy individual employers are already implementing increased workplace flexibility, noting decreases in expensive staff turnovers, higher productivity, lower absentee rates, and a strong hiring tool to attract talent.

Flexibility policies would benefit Maine’s large population of elderly workers and their employers. Maine has the highest median age of any state: 43.5 years. Financial need often requires older workers to stay in the workforce longer. Retaining older workers also can ensure that jobs requiring particular skills remain filled despite the skills gap. Keeping older workers in the workplace means fewer turnovers for businesses, decreased reliance on government services, and a patch in Maine’s skill gap.

Workplace flexibility also makes life easier for Maine’s many working mothers. According to a report by Working Poor Families, women head one in three working poor households. A Bangor Daily News analysis of Department of Health and Human Services data found that 40 percent of babies born in Maine in 2011 were born to unwed women. Workplace flexibility laws would help ensure that women do not have to choose between taking care of a sick child and keeping a job. In turn, working women will have increased their financial independence and a decreased reliance on the state.

Legislating workplace flexibility has precedent. Former Vermont governor Kunin has championed workplace flexibility. In January, Vermont’s “right to request” law took effect, ensuring that employers must consider a request for flexible scheduling without the employee fearing penalty and must grant reasonable requests unless employers offer a compelling case for denial.

Implementing workplace flexibility policies in Maine would ensure that working mothers could care for a sick child and that more aging workers could attend doctor appointments without penalty from their employers. Workplace flexibility policies would also give Maine employers a competitive hiring edge, the financial benefit of decreased turnover rates, and a larger, stronger workforce. Workplace flexibility is good for everyone: employer, working mothers, aging workforce, and traditional young male workers. It’s the 21st century—high time for the workplace to catch up.

Maine’s bankrupt health policy

This year, 1,300 Mainers will be saddled with catastrophic health costs.  Here’s how it could have been avoided – while c
reating thousands of jobs and boosting state GDP.

Medicaid-bankruptcy 7-3-2014Yesterday, the White House Council of Economic Advisors (CEA) released a report examining the differences between states that have accepted federal healthcare funds to expand Medicaid and the minority of states – including Maine – which still have not expanded.  Fittingly, the report is titled Missed Opportunities: The Consequences of State Decisions Not to Expand Medicaid.

The missed opportunities are manifold.  First, rejecting billions of dollars in federal funds has predictable consequences for state economies.  The states seizing the opportunity are adding jobs – 79,000 in 2014 alone – and enjoying the attendant impact on state GDP.  The CEA estimates expansion states will experience $62 billion in new economic activity by 2017.

Meanwhile, non-expansion states are languishing with higher rates of uncompensated care for the uninsured tearing gaping holes in hospital budgets.  In Maine, where tens of thousands of people who would be covered remain uninsured, two-thirds of hospitals are struggling with budget shortfalls and layoffs. In contrast, covering 4.3 million uninsured working poor has shored up hospital budgets in expansion states.

The CEA’s detailed state-level analysis echoes a familiar, but frustrating, statistic: had Maine’s Legislature mustered two or three extra votes to override the Governor’s veto, the boosted demand for services would add up to 3,000 new jobs and $530 million to state GDP over 2014-2017.

But the economic consequences of ideological decisions don’t just impact the state economy – they make themselves felt at the individual level.  The 2010 health reform was critical, for many reasons: healthcare costs were dragging the nation’s economic competitiveness down.  Americans were paying too much for care that was too often uncoordinated and redundant.  Most important, skyrocketing health costs barred too many Americans from needed care, and saddled many others with onerous medical debt.  For too many, a health crisis mushroomed into a financial crisis: bankruptcy.

Low- and moderate-income Americans no longer have much cushion against the vicissitudes of the modern economy – job loss, underemployment, and unexpected health crises.  Consumer bankruptcy has risen over the past century in the United States with rates spiking dramatically between 1980 and 2005.  In 2005, one in fifty-five American households declared bankruptcy.  In 2012 alone, more than 3,000 Maine households declared bankruptcy.  Contrary to the old stereotype of the heedless, profligate borrower, most Americans declaring bankruptcy are older (the median age has risen to 45 in recent years), married, high-school educated – and heavily burdened with medical debt.

Medical debt has become the leading cause of bankruptcy in America, driving three-fifths of all filings.

This is one of the areas where the CEA analysis shows the biggest differences for consumers: in states that have expanded Medicaid, 193,000 low-income workers are protected from what otherwise would have been catastrophic medical costs – healthcare bills that eat up more than a third of one’s annual income.  In contrast, based on economic projections, 1,300 uninsured Mainers will face catastrophic costs this year – the kind that pushes Americans to file bankruptcy for lack of other options.  The tragedy here is that these individuals’ costs would be covered, had the governor followed the Legislature and accepted the federal healthcare funds here in Maine. CEA projections indicate that another 4,000 Mainers who would have been covered under Medicaid expansion instead will have to borrow or skip payments in order to pay necessary medical bills.

America has endured a decades-long healthcare cost crisis. For the sake of the economy, our leaders need to meet it head-on.  The Affordable Care Act was a major step toward that objective. Running away from reality, or refusing reform, might score partisan points with the base, but we need leaders who focus on the next generation, not the next election.  Executive intransigence has meant Maine misses out on thousands of good jobs and a badly-needed jolt to our state GDP. But this recent analysis shows that this policy failure has also directly undermined the economic security of thousands of Mainers and their families.  Maine’s hard-working people earn less than our New England counterparts.  Burdening thousands of them with medical debt that could have been avoided – and risking pushing them into medical bankruptcy – is not principled politics.  It’s intemperate, it’s heedless, and it’s cruel.

Property tax relief falls short in 2013, major policy changes still needed

The amount of property tax relief Maine residents claimed under a new state tax credit will fall $9-12 million short of the $34 million forecast, according to the most recent monthly revenue update from Acting Finance Commissioner Richard Rosen.

In 2013, the legislature created the Property Tax Fairness Credit (PTFC) to replace the longstanding Maine Residents Property Tax and Rent Relief Program (also known as the “Circuit Breaker”). This change, buried in Part L on Page 578 of the state budget, was mostly bad news for low- and middle-income working Mainers. The $22-25 million in property tax relief provided by the PTFC in 2013 pales in comparison to the $57 million the Circuit Breaker would have made available, and the 2013 law also turned 2012 into a gap year where no targeted property tax relief was available at all.

In addition, the 2013 PTFC featured a narrow definition of income in the eligibility formula that excluded nontaxable income like Social Security and interest on government bonds. As a result, it treated wealthy retirees with large amounts of nontaxable income and no wage and salary income as if they had no income at all for the purposes of the credit. This had serious consequences and demonstrates why last-minute policymaking, done hastily during late-night budget negotiations may not always yield the best results. Working families struggling to pay property taxes got much smaller credits than they would have under the broader definition of income used by the Circuit Breaker’s eligibility formula while more affluent retirees with tax-exempt income received much more generous tax relief.

A bipartisan group of lawmakers in 2014 repaired at least some of the damage, although much more still needs to be done. LD 1751—a bill sponsored by Speaker of the House Mark Eves (D-North Berwick), amended by Senator Richard Woodbury (U-Yarmouth), and voted out of the Taxation Committee unanimously— broadened the definition of income in the eligibility formula to include the nontaxable sources of income that used to be counted under the Circuit Breaker program. In doing so, the bill redirects most of the benefits of the credit to working Mainers who need it most. Nevertheless, it did not increase the total amount of the credit. In total, eligible Maine residents will get no more than $35 million from the PTFC in 2014, compared to the $60 million they would have received under Circuit Breaker.[1]

Targeted property tax relief under the Circuit Breaker/PTFC is one of the major areas where state lawmakers have made cuts in recent years to help balance the budget in the wake of a historically large collapse in revenue brought on by the recession and exacerbated by large income and estate tax cuts that mostly benefited high-income and net-worth Mainers.

While annual statewide property tax collections increased by more than 20% from $1.876 billion in 2007 to $2.267 billion in 2013, the governor and legislature cut in half property tax relief targeted at low- and middle-income Mainers struggling with high property tax bills.

Lawmakers have a long way to go to restore their commitment to low- and middle-income Maine residents. The good news is that the PTFC is, in some respects, an improvement over the Circuit Breaker. It’s a credit that taxpayers can claim on their annual income tax returns, instead of a standalone refund application that taxpayers have to wait to file in the fall. Now lawmakers need to increase it to ensure that it delivers the same amount of relief as the Circuit Breaker did before the recession.

[1] The credit under the new 2014 version of the PTFC is equal to 50% of the amount by which a household’s tax bill exceeds 6% of their income, up to a maximum of $600 for non-elderly households and $900 for elderly households. Eligibility is capped at $33,333 of annual income for single-person households, $43,333 to two-person households, and $53,333 for households with 3 or more people.

If the Circuit Breaker were still in place, the credit would equal 50% of the amount by which a household’s tax bill exceeds 4% of their income plus 100% of the amount by which a household’s tax bill exceeds 8% of their income, up to a maximum of $2,000. The income limit would be more than $64,000 for single-person households and more than $86,000 for multiple-person households.

For example, a family of three with an income of $30,000 and a property tax bill of $2,000 will get a $100 credit under the PTFC in 2014, but they would have received a $400 benefit if the Circuit Breaker were still in effect.


Percy Spencer’s Candy Bar: Health Care Reform and the Innovation Economy

Health Care Reform and InnovationYesterday, my scientist brother promised my eight-year-old son a new Hot Wheels car if he could research and explain how the microwave cooked his lunch.  My son vanished upstairs and came back triumphantly explaining how a scientist named Percy Spencer noticed the candy bar in his pocket melted after he stood next to an active radar set.  Mr. Spencer came back later with popcorn kernels in his pocket, and sure enough, they popped.  Spencer, inventor of the microwave oven, was born in Howland, Maine.  After his widowed mother left him to be raised by relatives, Spencer taught himself radio technology from books.

Percy Spencer was an innovator, and innovation was the gasoline that propelled the American economy through the 20th century.  Since the 1970s, innovation has slowed. And, the U.S. no longer leads the world in entrepreneurial ventures and start-ups – while new companies made up half of all American businesses in the early 1980s, now they represent only 35 percent.

What do Percy Spencer’s candy bar and the fate of the American start-up have to do with health reform?  A lot.  Health care costs, now 18 percent of GDP, have been driving ever-higher health insurance premiums.  By 2008, some workers found themselves tied to their jobs just for the health insurance, a critical benefit.  They did not dare strike out on their own entrepreneurial venture, for fear they would lose their health coverage.  And this was a reasonable fear – one in four entrepreneurs went without health insurance in 2012.  This phenomenon, where people stay in jobs to keep health benefits they could not otherwise afford, is called “job lock.”

A recent Forbes piece, “Four Reasons the ACA is a Boon to Entrepreneurs,” explains what it means for the economy now that private insurers cannot refuse to cover preexisting conditions and people without access to employer health coverage can buy insurance on the ACA marketplace – often subsidized to make monthly premiums affordable:

  • The “Job Lock” Phenomenon is Broken: 

People with good ideas and imitative can go into business for themselves without fearing medical bankruptcy, since quality, affordable health insurance coverage is available on the exchange.  One study also found that young people, who now can stay on their parents’ coverage until age 26, are more than twice as likely to start their own businesses as before.

  • Start-ups Can Attract Better Talent:

Small, new companies once had difficulty competing with larger, more established companies offering better benefits to new hires.  Now with insurance available through the marketplace, potential hires  inspired by a new company’s promise might be more comfortable taking the leap.

  • Women Might Start More Businesses

The majority of entrepreneurs are men – and even though more women than ever are graduating from college or pursuing science, technology, engineering, and math (STEM) degrees, male entrepreneurs are more overrepresented than ever.  This could be because young women are less willing to go without health insurance to start a business.  However, the study of young workers covered by their parents insurance cited earlier also found young women driving much of the increases in entrepreneurship.

  • The ACA Offers Affordable Options for Employers, Too

While premiums for some companies may increase due to the more comprehensive Essential Health Benefits mandated by health reform – including maternity care and cancer screening – premiums for 35 percent of businesses will go down.  And, for small businesses with only a few employees, the Small Business Health Options Program (SHOP) will provide a federal tax credit worth 50% of an employer’s contribution toward premiums.  Other companies can direct employees to buy insurance through the exchange and reimburse them.

My son won a Hot Wheels car yesterday, but it felt bittersweet for me.   A recent Portland Press Herald article described how a Ball State University group gave Maine a “C” in manufacturing, citing high benefit costs and low rates of innovation..  Maine gave the world Percy Spencer, and Hiram Maxim, inventor of the Maxim machine gun.  Frank Crowe, who built Hoover Dam, was a UMaine alumnus.

The Ball State study gave Maine high marks in “human capital” as a strength.   Perhaps as health reform dissolves “job lock” and frees people to pursue their highest goals, Maine’s innovators can shine again.

What to Look for in Friday’s Jobs Report

Tomorrow, the federal Bureau of Labor Statistics will release its monthly state-by-state jobs and employment report. While the data are subject to revision and should be viewed with some skepticism, they help paint a picture of how Maine’s employment situation stacks up relative to other states.

In all likelihood, the story will remain much the same as it has been in recent months. Maine’s unemployment rate will likely tick downward, along with most other states. Maine probably added jobs from April to May, and the percentage of the population that is employed will continue to be higher than in most states.  The Governor’s office and his allies will tout these findings and claim that they prove his economic policies are succeeding.

But on closer examination it is clear that not all is well for Maine workers and job-seekers:

  • More jobs are a good thing, but Maine has added them at a much slower pace than other states. Maine is one of only five states that have recovered fewer than 50 percent of the jobs lost during the recession. The other states are Mississippi, Alabama, New Jersey, and New Mexico.
  • The relatively high percentage of Maine’s population that is employed is a good thing, but that figure masks the fact that older workers and workers who are employed only part-time but want full-time work are driving this trend. Maine’s hard-working 55-and-older population and large number of dedicated but underemployed part-time workers are why our employment rate is relatively higher than in other states. Employment levels for prime working age Maine adults – those between 25 and 55 who are most likely to be supporting families with children– have barely improved through 2013.

Bottom line: it’s too soon for victory laps.  Maine’s economy continues to under-perform compared to most other states. The number and quality of jobs Maine needs to create real, broadly shared prosperity remains daunting. We’re approximately 15,000 jobs below our pre-recession peak and need to add a total of 32,000 jobs to keep pace with population growth. Arguably, we must attribute many of the improvements in Maine’s economy to improvements in the national economy. We can also link the fact that we continue to fall short – especially in terms of job growth and particularly in rural Maine –to some of the LePage administration’s ill-conceived policy choices. For example, Maine health care jobs are at risk, due in part to the refusal by the Governor and his allies to accept federal funds and increase health care access for tens of thousands of Mainers. The Governor’s refusal to issue bonds or to do so in a timely manner has left thousands of potential jobs on the table, and added millions of dollars in costs to ongoing projects. Funding cuts at the state level have resulted in pink slips for teachers, police officers, and state employees.

While the LePage administration will likely use tomorrow’s jobs report to tout its performance, putting the jobs numbers in context reveals the significant challenges that Maine workers still face and the long road ahead even five years since the official end of the Great Recession.

LePage’s Erroneous Bonds Policy Seriously Threatens Maine Hospital Finances

Last week, the (Lewiston) Sun Journal reported that the LePage Administration’s anti-bonding policies are forcing MaineGeneral Medical Center to pay $42 million more in interest on loans than is necessary on the construction of their new hospital in Augusta. That’s $1.4 million in avoidable interest payments annually for 30 years.

MHHEFAThe legislature created the Maine Health and Higher Education Facilities Authority (MHHEFA) to allow entities like hospitals, nursing homes, public colleges, and other eligible nonprofits access to low-interest bonds. For 25 years, nonprofits have been able to join a pool under the MHHEFA that garners them lower interest rates saving money on medical costs, elder care, tuition rates, and other community services.

For more than three years, Governor LePage has refused to authorize the sale of the nonprofit bonds asserting that voters should approve them and that, if the institutions default, the state’s credit rating will be impacted.

By law, the state is not liable for repayment of these nonprofit bonds. However, if the institutions default, the state would have a moral obligation to repay them, thus they are frequently called “moral obligation” bonds. But Robert Lenna, who conceived of the idea for MHHEFA, calls concerns about an impact on the state’s credit rating “nonsense” and points to safeguards that protect the state, including healthy reserve accounts maintained for just this purpose.

The governor’s professed deference to voters is a sham. He has twice refused to authorize bonds that the voters did approve.  And earlier this year, he proposed his own moral obligation bond for a $100 million renovation to the Windham prison through bonds issued by the Maine Governmental Facilities Authority (MGFA), without regard for voter approval. MGFA is an entity almost identical to MHHEFA, for use by the courts and other state agencies.

Hospitals in Maine today are struggling. The Maine Hospital Association (MHA) reports that an all-time high two-thirds of its 38 member hospitals are implementing layoffs and pay freezes to address financial shortfalls. Hospitals in Augusta, Ellsworth, Brunswick, Bridgton, Rumford, and Calais, have recently announced layoffs.  In March this year, the Eastern Maine Medical Center in Bangor reported a $7 million budget shortfall. And Maine’s biggest hospital, Maine Medical Center, cut 225 jobs due to a $13.4 million operating deficit in August 2013. The hospitals cite fewer patients, lower Medicaid and Medicare reimbursements, and higher charitable care costs as factors contributing to their financial woes, but they also say Maine’s failure to expand Medicaid under the Affordable Care Act has made lay-offs necessary.

Maine needs healthy hospitals and the jobs they provide our communities. We need state policies that bolster our hospitals, not ones that cost them more money and force lay-offs of hardworking Maine people. Governor LePage’s refusal to allow hospitals access to low-interest MHHEFA bonds is weakening our hospitals’ finances, undermining Maine’s economy, and will unnecessarily raise health care costs for all of us.

State Income Tax Revenue Falls as Bill for 2011 Income Tax Cuts Comes Due

Four years after Maine Revenue Services (MRS) and the Legislature’s nonpartisan fiscal office put a $166 million price tag on Governor LePage’s income tax cut, an enormous decline in FY 2014 state income tax revenue appears to be validating their estimates. State income tax revenue through the first 10 months of fiscal year 2014 is $109 million—or 8.9%— lower than it was last year, according to the State Controller’s latest revenue report for the all-important month of April. This revenue drop-off is the result of two factors: the state income tax cut passed by Maine lawmakers in 2011, and an artificially large increase in personal income and tax revenue in 2012, driven by high-income taxpayers anticipating inevitable federal tax increases in 2013.


Anticipated Federal Tax Increases in 2013 Pushed Up 2012 Revenues

High-income taxpayers in Maine and across the nation shifted income from 2013 into 2012 in anticipation of the “fiscal cliff”—a series of automatic federal tax increases and spending cuts scheduled to automatically take effect at the end of the year. This shift drove large increases in state income tax revenues all across the nation in Fiscal Year 2013, which ended June 30th 2013. In Maine, total personal income tax revenue in Maine increased by nearly $90 million (6.2%) in FY 2013, but that only ranked 34th among the 43 states that collect personal income taxes, and 31st on a per capita basis, according to MECEP analysis of Census Bureau data on state tax collections.

Congress passed the American Taxpayer Relief Act (ATRA) on January 1st 2013 to deal with the fiscal cliff. Although ATRA increased taxes compared to 2012, it prevented much larger tax increases had Congress failed to act.

State Income Tax Cuts Are Driving This Year’s Decline in Revenue

Meanwhile, on the same day that Congress passed ATRA, Maine’s historically large income tax cut began to take effect. Passed by Maine lawmakers in 2011, the tax cut Governor LePage proclaimed the “largest tax cut in Maine history” reduced Maine’s top income tax rate from 8.5% to 7.95%, collapsed the 4.5% and 7% brackets into one 6.5% bracket, and replaced the 2% bracket with a 0% bracket. MRS estimated the cost to the state to be $79 million in fiscal year 2013. Without the tax cut, Maine income tax revenue in FY 2013 would have increased by 11.7% instead of 6.2%, and Maine would have ranked 17th in per capita personal income tax revenue growth that year instead of 31st.

With state personal income tax revenue artificially inflated in FY 2013, a downward correction in FY 2014 was inevitable. Through the first half of FY 2014, nearly all states that levy personal income taxes are experiencing slower annual growth than the year before, and 11 states are on track to see an overall decline.

Maine’s current drop in personal income tax revenue is especially large thanks to the 2011 state personal income tax cut, estimated to cost $166 million this year. FY 2014 marks the first full year to gauge the impact of the tax cut on the state’s budget, and so far the original estimated cost from MRS and the Legislature’s nonpartisan fiscal office appears to be close to the mark: income tax revenue is about $28 million over the forecasted amount so far this year, but $14 million of that is due to the fact that the Property Tax Fairness Credit—a new income tax credit for low-income Mainers with high property tax bills—is turning out to cost much less than expected. The cause of the remaining $14 million of the surplus income tax revenue so far this year is tough to determine; it could be due to any number of factors and is small enough to be within the typical margin of error in an overall forecast of $1.4 billion in annual income tax revenue.

Tax Cuts Have Consequences

There is no sign that the income tax cuts enacted in 2011 are costing any less or more than was originally forecast. Tax cut advocates like to claim that Maine’s current procedures for forecasting the impact of tax cuts fail to account for taxpayers working harder and the economy improving when policymakers cut taxes. But in most cases, including the 2011 tax cut, there is little evidence of these “dynamic” supply-side effects, and to the extent they occur they are adequately accounted for in Maine’s current procedures for estimating the cost of proposed tax changes.

With large tax cuts, only one thing is certain: they reduce tax revenue and make it harder for us to make the public investments in education, workforce training, research, infrastructure, and the rest of the foundation required for a thriving 21st century economy that works for everyone.