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August 6, 2012

Grading the gov

photo/courtesy Governor's office
photo/courtesy Governor's office
Gov. Paul LePage, who ran on a pro-business platform, gets a generally favorable mid-term report from Maine's leading chamber executives

A question of vision

In a follow-up interview, we asked whether Gov. Paul LePage has an overall strategy for economic and business development, or just a series of tactics? Here are the responses:

John Porter, Bangor region chamber: "The governor in has a very clear vision and strategy for the state. He believes that lower taxes and less regulation will grow the economy. There are those of us who believe that investments — in education, infrastructure and research and development — comprise another important component, but clearly the governor doesn't share that view. That doesn't mean he lacks a vision or a strategy. It means simply that his vision is more limited in scope."

Chris Hall, Portland regional chamber: "We're all used to thinking about economic development plans as intricate things looking forward to the next wave of growth. Gov. LePage seems to be focused instead on getting the basics right — regulations, taxes, education and energy costs. And if it doesn't look like the old plans we're familiar with, maybe those plans weren't working too well and a new approach is needed."

Dana Connors, Maine state chamber: "He has demonstrated a commitment to put the state's financial house in order by controlling pension and welfare costs. He has also focused on issues that impede our growth — energy and health care costs, regulations and income taxes rates. He's done this consistently, and believes this program will improve our economy."

Chip Morrison, Androscoggin chamber: "The governor has reconstructed the way the state supports economic development in a number of ways: by addressing state policies and laws that impede development; by reorganizing how the DECD supports local development; and by reorganizing the state's work force development system."

In January 2011, Mainebiz interviewed executives from some of Maine's leading regional chambers of commerce — in Augusta, Portland, Lewiston and Bangor — on their expectations for the avowedly pro-business agenda of the incoming administration of Gov. Paul LePage. Nineteen months later, after the close of the last legislative session, we've returned to the same sources for their take on what's been accomplished so far, and what can be expected for the remainder of the Republican governor's first term.

Neither Department of Economic and Community Development Commissioner George Gervais nor the governor's office responded to several requests for comment.

Expectations for the LePage administration were high among Maine business leaders, and to a large extent they have been met, according to Chris Hall, senior vice president for government affairs at the Portland Regional Chamber of Commerce.

At a recent appearance before chamber members, Hall said, "The governor was respectful, he was funny and persuasive. He had command of the facts. He's able to tell you why he's chosen a particular policy. I can't tell you how impressed our members were. He was terrific."

Dana Connors, president of the Maine State Chamber of Commerce in Augusta, says LePage's policy decision have "run true to form. He's been focused on controlling spending and getting our house in order. He's been relentlessly focused on fiscal matters, and that's what he told us he'd do."

Connors says he's compared the LePage agenda to a joint report put out by the state chamber and the Maine Development Foundation last year, and found that the two match well. "Energy, health care, regulations, skills and education — it's all there," he says.

In particular, LePage's ability to amend the health insurance laws, convince Democrats in the Legislature to support a major tax cut package, streamline response times for permits and initiate education reforms comes in for near-unanimous praise from business leaders.

"It's a question of attitude almost as much as the actual policies," says Chip Morrison, president of the Androscoggin County Chamber. "For a business, you need someone to listen and make decisions. If the answer is no, you want to hear it right away, not find out months later." Dating back to his days in municipal government, Morrison says he finds a consistent theme with business owners. "Our object in city hall was to let business leaders know we care about their success. And that's the key at all levels of government."

John Porter, president of the Bangor Region Chamber, says LePage "has been exactly the person he said he would be when he campaigned. He's been his very conservative self, and has largely achieved the results he wanted in terms of taxes and regulation and keeping government to a minimum."

Missteps

Yet as the administration heads toward mid-term legislative elections in November — a traditional test of the popularity of the administration's policies, if not the governor himself — there is also a sense of unease about some recent policy directions.

There was a significant split with business leaders over LePage's handling of the $95 million bond package the Legislature produced in May — a modest one, by recent standards. LePage vetoed the $20 million research and development bond that was a high priority for business, and lawmakers sustained the veto after a dozen Republican House members changed their initial "aye" votes to "nays."

Nor did the governor's announcement that he would not issue a business-related bond approved by voters in 2009 until January 2014 sit well with business lobbyists. Among the items in that bond issue was funding for redevelopment of the former Brunswick Naval Air Station.

The chamber leaders all reported working hard to overturn the veto, to no avail. "We need to invest that money if we're going to be able to support growth," says Porter. "I understand that the governor is wary of taking on debt, but this is a point on which I personally disagree with him."

Porter points out that the Bangor area's growth is fueled by the success of research efforts at the University of Maine, and private companies such as The Jackson Laboratory and the Mount Desert Island Biological Lab, all of which have benefited from state bond issues in the past.

Morrison says the failure to make use of borrowing "has the effect of putting the economy on hold," a risky decision given continuing weakness in the state economy.

Connors says if LePage is serious about funding these kinds of projects through regular budget appropriations rather than bonds, "then we'd like to see it sooner rather than later."

Connors, a former Department of Transportation commissioner, wasn't happy about LePage's pledge not to issue the transportation bond issue on the November ballot if, as usual, it passes. Connors calls the statement "troubling."

"Transportation is so fundamental to the economy that we really can't neglect it," Connors says, noting he understands LePage "wants to rely less on tax revenue and more on alternative funding," but that "we can't simply do more with less. It just can't be done."

Mixed results

There are other areas, though, in which LePage gets higher marks. Porter says that his focus on energy costs "is long overdue, and I applaud him for challenging policymakers to change course." And while northern Maine has benefited significantly from the installation of industrial-sized wind turbine projects, Porter says that LePage has a point when he objects to the federal tax credits that have encouraged such construction. "I'm not dismissive of that argument, though we should move ahead with wind project when they make sense," he says.

Connors says that, concerning energy options, "We'd like to see all options on the table," including wind, tidal and solar. "Competition between them is what will eventually bring down prices."

Hall points to LePage's education initiatives as a significant break from the past, including passage of the charter school bill and allowing student evaluations to be used in rating teachers. He acknowledges that these changes will show results only over time, but says, "the pace of reform has really accelerated."

Morrison says the health insurance legislation is particularly significant for small businesses, and that he thinks that the market-based approach the administration advocates can work. "It's going to take time, but it's our belief that the changes will be positive," he says.

Another area where some business leaders have moved one way, then another, concerns taxes. Some supported the Democratic-backed plan for tax reform that passed the Legislature in 2009 but was overturned by the voters in June 2010. That plan was revenue-neutral, increasing the scope of sales taxes to reduce income tax. The Androscoggin chamber backed that plan, but Morrison says the LePage approach is also something business can support.

The top individual income tax rate will be reduced from 8.5% to 7.95% next year, and another bill pledges to cut the rate over time to 4% using surplus revenue. "It also speaks to the need to move our rate closer to that of a majority of the other states," Morrison says.

But is it affordable? The unfunded portion of the tax cut package amounts to at least $340 million that will come due in 2013. Hall says the governor appears eager to cut the state budget to fit this need. "It's clear that he means what he says about taxes," he says.

The bull-in-a-china-shop thing

Then there is the question of LePage's outspokenness, which has garnered headlines — not always flattering — in the national media. Hall believes such attention doesn't really hurt Maine much in term of recruiting businesses from away. "At the end of the day, it's the fundamentals of the labor force, taxes and access to transportation that are make or break," he says.

But Porter takes a somewhat different view. "I'd like to see the governor being more positive," he says. "We hear a lot from him about what's wrong with Maine, but not very much about why businesses should come here."

His own view is more bullish. "I happen to think that this is a great time to start a business in the Bangor area, and we could use some help getting that message out," he says. "I don't think we've heard much about that from the governor. And we need to hear it."

Hall agrees that LePage needs to refocus more on his economic agenda, and how it will work for Maine in the future. "The other things can be distractions," he says. "But if he gets out on the road and explains how this can get the engine started and lead to better economic times for Maine, people will listen."

With that said, though, Hall says economic performance is a real concern. At the outset of the administration, Hall says the most important benchmarks would be the growth of personal income and the creation of new private sector jobs. So far, not so good, he says. "We were last in income growth [among the states] and near the bottom in jobs."

More recent economic data shows that Maine's GDP declined 0.4% in 2011, while New England as a whole grew 1.8%. Hall notes that unemployment in May, stable nationally, went up from 7.2% to 7.4% in Maine.

"Those are negative numbers," Hall says. "That's not good. By most measurements, we're in a recession." He hastens to add that it's early to read results from new policies, and Morrison agrees. "It's like trying to turn around the Titanic," he says. "You're not going to move it very fast."

Hall says the administration deserves more time to demonstrate that its approach can work. "After all, we'd had 40 years of trying to revive the economy by other methods, and we can see the results in how far we've fallen behind other states," he says.

In political terms, though, time is a limited commodity. Hall estimates that by this time next year the state economy will have to have come out of the doldrums, or LePage's re-election bid could be in jeopardy.

Morrison has another suggestion on how the conflicts of LePage's first two years might be eased: If the perception is that the governor is too partisan in his approach to the Legislature, try tacking in a different direction. "Mainers really appreciate independent thinkers. Those are the politicians they tend to respond to the most," he says.

Morrison, a lifelong independent, recalls that when he was approached by the McKernan administration about becoming a commissioner — he served both at Administration and Labor — he specifically asked whether "not being a Republican was OK." Told that it was, he says not having a party affiliation can be helpful in government.

"In business, we're not hiring Rs and Ds," he says. "When we look for what business needs from government, it shouldn't be a partisan thing, either."

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