Charting Maine’s Future

In case you missed them, here are two recent news stories about making government services more streamlined and efficient…

Yesterday’s Kennebec Journal featured an interview with retiring state controller Ed Karass, who had accumulated 28 years’ worth of service to Maine’s state government. He brings a lot of perspective to the issue of Maine’s state spending. Just before retiring, Karass testified to the state’s Appropriations Committee and told them that, “rather than continue to try to rely on consolidation of operations, the merging of operations, which may save a marginal amount of money in the short term, they really needed to determine what government should look like over the next several years.”

Although Karass is enthusiastic about the new school district consolidation law: “I think instead of [cutting down to] 80 school districts, [Baldacci] should have been braver and gone for 16.”

He also offered these sobering thoughts on the next four years:

I think the next governor really has his or her work cut out for him or her.

I would like to see a governor that, and a Legislature, more than balance the budget. They need to address the liabilities that are building up … in the retirement system, retiree health. We need to look at replenishing our cash and come up with a plan to repair the state’s General Fund balance sheet.

It’s going to be a difficult position to be in because the (federal stimulus funds) will be sunsetting, the economy hopefully will be at a turnaround.

But in all reality, the governor coming in will not be able to cut taxes, will not be able to expand programs and will have to concentrate on putting the state’s fiscal house back in order…

This is not something we will grow our way out of.

Notwithstanding Karass’s skepticism of consolidation, today’s Portland Press Herald has an interesting story about the school districts of Portland, South Portland, and Westbrook sharing bus maintenance facilities, coordinating vocational courses, and partnering on staff development in order to blunt the impacts of anticipated budget costs.

Portland’s new superintendent, Jim Morse, had this to say about the initiative: “We tried to pick things that were natural areas of collaboration… A lot of this isn’t rocket science. It’s just getting past tradition.”

Governing Magazine spoke with GrowSmart Maine a few weeks ago about the state’s budget struggles, and its outlook for the future. The article has just been published in the July 2009 issue - check it out for a good overview of the state’s financial situation.

Maine’s budget had to shrink by $500 million this year - an 8% reduction on the previous biennium’s $6.3 billion budget. But if you think we’ve got it bad, just look at California, which is struggling to deal with a $64 billion shortfall in an extremely divided state legislature.

The Los Angeles Times has created a budget-balancing “game” (I hesitate to call it that, since it forces you to make some dismal choices) that puts these problems some context. Mix and match your choices among a menu of jobs-killing tax increases and misery-inducing health and human welfare programs to come up with the missing billions.

From an opinion piece in today’s Wall Street Journal:

At last, there’s a place in America where tax cutting to promote growth and attract jobs is back in fashion. Who would have thought it would be Maine?

This month the Democratic legislature and Governor John Baldacci broke with Obamanomics and enacted a sweeping tax reform that is almost, but not quite, a flat tax. The new law junks the state’s graduated income tax structure with a top rate of 8.5% and replaces it with a simple 6.5% flat rate tax on almost everyone. Those with earnings above $250,000 will pay a surtax rate of 0.35%, for a 6.85% rate. Maine’s tax rate will fall to 20th from seventh highest among the states. To offset the lower rates and a larger family deduction, the plan cuts the state budget by some $300 million to $5.8 billion, closes tax loopholes and expands the 5% state sales tax to services that have been exempt, such as ski lift tickets.

To be clear, Maine more or less had a flat tax before tax reform, too: the 8.5% rate applied to everyone earning more than $18,250 a year, which means that it applied to most working families. And the tax reform plan was separate from the Legislature’s efforts to trim spending by $300 million.

Still, getting kudos from the WSJ demonstrates one of the big advantages of the Legislature’s tax reform effort: Maine will be regarded as a more business-friendly state, and hopefully we can look forward to new businesses and job growth as a result.

George Smith’s latest column in the Kennebec Journal does its best to light a fire under State House lawmakers:

“It wasn’t exactly an earthquake, but when GrowSmart Maine released its Brookings Institution Report, “Charting Maine’s Future,” in October 2006, it took the state by storm….

“Real accomplishments followed, including a bond of $55 million for research and development and our “innovation” economy and two bonds for ‘quality of place’ land and river conservation and community revitalization… I got so excited about all of this that I joined the GrowSmart Board of Directors last year, eager to make sure this dynamic organization advocated strongly for the rural Maine attributes and values that Brookings recognized as our strength.

But Smith laments the lack of action on important initiatives that the Brookings report had recommended, and the bungling of others:

Example number one: consolidation of schools. Here’s what Brookings said: “Maine could realize between $10 million and $35 million in annual K-12 education-costs savings without closing or consolidating a single school by reducing administrative costs to various national or Maine consolidated-district standards.”

That’s right, we could have reduced administrative costs substantially “without closing or consolidating a single school.”

But we made a mess of it, didn’t we?

…

And then there’s one of my favorite Brookings’ recommendations: a Maine government efficiency commission “to methodically review the structure and operations of state government and propose specific reforms to eliminate duplication and inefficiency.”

This didn’t happen because the Legislature choked on the suggestion that the commission’s recommendations “be subject to a single up-or-down vote by the Legislature.”

Few legislators are willing to give up their right to defend favorite state programs and jobs in an up-or-down single vote.

Just to be clear, GrowSmart Maine’s official position may differ somewhat from Smith’s - as flawed as some people think it is, Maine’s budget and schools are better off with the school administrative consolidation plan in place than they would have been without it. We worked in Augusta to make sure that the plan was enacted two years ago, and we continue to work to keep the state on task to dedicate more of our limited resources into classrooms, instead of administration.

On Smith’s second point, the desperate condition of this year’s budget may actually be able to convince lawmakers to give up their privilege to micromanage favored state programs - a privilege that’s become a heavy burden in the dire fiscal conditions of the past few months. In his budget proposal, Governor Baldacci proposed an independent efficiency commission similar to the concept endorsed in the Brookings report. We’ll see if it survives the State House next week, when legislators vote on the budget.

Last Friday, Governor Baldacci announced his plan to deal with another 2-year budget gap of nearly $570 million.

Revised economic projections now predict that the government will have to trim costs from its $6.3 billion budget for 2008-2009 down to $5.8 billion for 2010-2011. Broad-based tax increases lack political support, so cutting spending is the only practical option, and the cuts are sure to be painful.

However, we at GrowSmart Maine see a tiny silver lining in all of this. As part of his proposal last Friday (read the details here), the Governor proposed an independent “Commission to Recommend Streamlining of State Programs and Services” that would be charged with consolidating and streamlining government agencies in order to save $30 million in 2011.

This concept has a lot in common with a recommendation from the Brookings Institution in our 2006 “Charting Maine’s Future” report. In our “action plan for promoting sustainable prosperity in Maine,” experts from the Brookings Institution called for a new, bipartisan commission that would work to propose reforms and locate program savings of up to $100 million a year. These savings would be written into the budget and sent to the Legislature as a package for a straight up-or-down vote.

The concept aimed to remove the difficult work of reinventing and reforming government from the politically-charged atmosphere of the State House, where agencies and lobbyists are constantly angling to preserve the status quo. “Charting Maine’s Future” also recommended that the savings be re-invested in statewide income tax reductions and new research and development funding.

We first proposed this idea in legislation two years ago, after the report was first published. Unsurprisingly, legislators were unwilling to sacrifice their control of the budget to an independent commission, and lawmakers essentially ignored the proposal. That said, even if they had had the foresight to embrace the idea, it still wouldn’t have saved us from the current shortfall, which is nearly three times bigger than the Brookings Institution’s most optimistic projections for possible savings.

Now that the budget has become a nightmare, it looks as though lawmakers might be more willing to ask for independent help. Of all of the painful elements in the Governor’s proposal, the independent commission idea seems to be among the more palatable ideas. On Saturday, the Bangor Daily News endorsed the Commission in an editorial:

“The governor has done a good job of spreading the cuts to minimize harm to the state’s most vulnerable populations and to not stifle future economic growth…

He is taking a risk in booking $30 million in savings in 2011 from a Commission to Recommend Streamlining of State Programs and Services that he would form as part of the budget. At the same time, putting that number on paper will make the panel take its work seriously. There have been numerous previous efforts to streamline government and reduce spending that have not resulted in significant savings.

Gov. Baldacci has presented a reasonable way to bridge an unprecedented budget shortfall. He also set the standard for changing his blueprint.”

The Governor’s target of $30 million is relatively modest, but it’s a good start. If Augusta gives the Commission the latitude and respect it needs to get its job done, it might earn a place in improving future budgets as well.

Better late than never…

Spending big money on small governments isn’t a problem that’s unique to Maine. Tom Brokaw discusses the problems of “local control” in this op-ed, which was published in Monday’s New York Times.

Mr. Brokaw doesn’t specifically mention Maine in this piece, although he certainly described a lot of the problems we have. At least we can take small comfort in knowing that we’re not alone.

http://www.nytimes.com/2009/04/20/opinion/20brokaw.html

Yesterday afternoon, we had a visit from John D’Anieri, an educator who has some inspiring ideas for new models of K-12 education in Maine.

John firmly believes that Maine can spend less on its schools and accomplish better educational results by getting back to basics with smaller schools, fewer administrative staffers, and closer relationships between teachers and students. To catch on, these ideas will require big changes in the way Maine funds its schools, and in how Mainers think of education. So to prove the concept, John is working on a pilot project, which he hopes to have up and running this fall: the Maine Farm Enterprise School.

The Farm Enterprise School would combine apprenticeships and local economic development initiatives with high academic expectations to provide an alternative, lower-cost and higher-value education experience for students.

John stresses that the Farm Enterprise School is only one of many small-school models that could be tailored to suit different interests and styles of learning, if the state were more willing to embrace innovation in education. But he intends for the Farm Enterprise School to be a compelling example for the future of Maine schools: one that produces better results at lower costs, and can be replicated or modified to suit different communities all over the state. Learn more at:
www.mainefarmschool.org

Yesterday’s Mainebiz Daily newsletter reported that Augusta lawmakers in the Agriculture, Forestry and Conservation Committee are recommending that the state cut $4.8 million from the state’s dairy subsidy program in order to help deal with the state’s massive budget shortfalls.

To put that number in some context: $4.8 million represents about 37% of what the program is expected to cost in the next fiscal year. Assuming the $4.8 million cut is on an annual basis (it might be a two-year cut for the biennial budget; unfortunately, the short item in Mainebiz doesn’t clarify this), the state will still spend $8.2 million on dairy subsidies next year, by my math. And for some big-picture context, the state needs to cut over $800 million for the next biennial (2-year) budget.

GrowSmart Maine isn’t taking any positions on this year’s budget debates. We’ve long criticized the way that budget decisions are made in Augusta - it’s more of a turf war than a serious evaluation of the state’s priorities and long-term aspirations - and we’re instead focusing on making big-picture recommendations and executing an action plan for a more cost-effective government with our upcoming Governing Maine in the 21st Century project.

But at the end of yesterday’s newsletter, Mainebiz editors solicited feedback on the dairy subsidy story, and framed it in an interesting way: “Given the state’s emphasis on protecting Maine’s quality of place, [should] subsidies that help Maine farmers survive — such as the $17.7 million awarded dairy farmers — be on the chopping block?”

The responses were collected here. Most respondents (about 60%) said yes, the dairy subsidies are a good candidate for budget cuts. After all, one commenter asked, why not subsidize other industries related to Maine’s “quality of place,” like toothpicks and paper and sardines? Where do you draw the line? Others pointed out the budget shortfall (which wasn’t referenced in the question) and the economic situation. Arguments in favor of the subsidies pointed out the value of locally-grown food supplies, and how dairies are still important to rural economies.

Economists frequently criticize subsidies as inefficient ways to accomplish public goals. If preserving Maine’s “quality of place” is what we’re after, of if our goal is to encourage more local food production, are dairy subsidies really the best tool at our disposal? Or could we accomplish these goals more effectively, at lower costs, by other means?

For instance (and this is pure speculation, but I think it would be worth investigating), we might be able to help more family farms and save money if, instead of spending $8.2 million a year on a dairy subsidy program, we spent only $5 million a year on purchasing conservation easements on working farms, promoting farmers’ markets, and creating new agricultural training programs to help farmers adapt to new opportunities and business conditions.

During the season, I help out at the market stall of a farm near where I grew up in western Cumberland County. I’ve heard anecdotally that the last few years have actually been pretty good for the small, diversified farms like the ones we see at farmers’ markets, thanks to renewed interest in locally-grown food and the increasing costs of shipping produce from places like New Zealand. The Brookings Institution cited Maine’s organic farms as one of the state’s most promising “business clusters” in our Charting Maine’s Future report two years ago.

But if you’re one of the state’s rising farm entrepreneurs - raising dozens of different produce crops and nursery plants, selling value-added products like cider and sauerkraut, raising seedlings in greenhouses during the winter - dairy subsidies don’t really do you much good. Maybe it’s time for a change.

I just received an e-mail from the president-elect’s transition team to notify me of a neat new “web 2.0″ feature on their web site, the “Citizens’ Briefing Book.”

It’s an online forum where you can share your ideas, and rate or offer comments on the ideas of others.

The best-rated ones will rise to the top, and after the Inauguration, we’ll print them out and gather them into a binder like the ones the President receives every day from experts and advisors. If you participate, your idea could be included in the Citizen’s Briefing Book to be delivered to President Obama.

I find this a pretty fascinating model of participatory government. Here in Maine, we’re fortunate enough to be able to expect a personal response when we call or e-mail our representatives in Augusta or Washington. But how does the president, with 300 million constituents, keep track of their top issues? And when thousands of bored cranks are writing to complain about the prime-time television lineup and other trivia, how does a citizen with a legitimately good idea rise above the noise?

The concept behind this website might be an elegant solution to these problems. Instead of sending hundreds of thousands of letters and ideas to one recipient, this website sends all those ideas to all of the other people inclined to write letters, and lets them decide amongst themselves which ideas are the best ones.

If you have an especially good idea that appeals to lots of other people using this web site, then Obama’s transition staff will get in touch with you, and the newly-inaugurated President will hear about it in a special briefing next week.

But even if you yourself can’t come up with a particularly galvanizing idea, you can still vote on other ideas to boost the ranking of ideas that seem good, and decrease the rankings of ideas that seem silly. Instead of having government staff or lobbyists determine which ideas are crackpot, and which are worthy, this website lets active citizens decide amongst themselves.

It remains to be seen how well it works - it’s possible that specific special-interest groups will try to flood the new site with votes for their individual agendas, for instance. But it’s an interesting experiment - check it out at citizensbriefingbook.change.gov.

More town-level results are coming in. Here are some highlights:

Voters in Scarborough opted not to tax people who are bad at math.

And 2007’s school administrative consolidation plan continues to move towards reality, as a number of Maine towns voted to merge 1950s-era districts into new, more regional school departments:

• Voters in Freeport, Durham, and Pownal voted to merge their three school administrations into one [read pre-election commentary on Future Freeport];
• Schools in Saco, Old Orchard Beach, and Dayton will also share a single administration (Saco and Dayton have long run an innovative system by contracting to send high school students to the private Thornton Academy);
• Voters in the Kennebunks voted to merge their district, SAD 71, with the school district in neighboring Arundel. 
• In Oxford County, voters in SADs 21, 39, and 43 decided to merge their districts into a new “Western Foothills School District,” which would be based in Rumford and include the towns of Buckfield, Hanover, Sumner, Hartford, Canton, Carthage, Dixfield, Byron, Roxbury, Mexico, and Peru. 
• The communities of Mount Desert Island will share a school district with Trenton and surrounding islands Frenchboro, Swans Island, and the Cranberry Isles.
• And voters in Mechanic Falls, Minot, and Poland voted overwhelmingly to consolidate into a single district.

In other news, continued declines in state revenue led Governor Baldacci to ask state agencies for another $150 million in budget cuts.

UPDATE: The Bangor Daily News printed an article on Thursday that gives the status of all of the state’s school consolidation referenda. Voters approved 12 plans and rejected 5 (most of which were for districts in Aroostook County). Read the article for a complete list of the new school districts.