2010: In Recovery? | Give it to us straight, Doc. How hard did the year hit us?
Illustration/Mike Gorman
Illustration/Mike Gorman
The panic attacks of the 2008 financial meldown eased into eleveated blood pressure as the markets struggled for aire in 2009. What remained? A persistent headache over the performance of the 2010 economic recovery and mounting anxiety over 2011. For a look back at the year that was, let's wander the halls of the triage unit better known as Maine's economy in 2010. Stat, everybody.
(Illustrations by Mike Gorman)
CRITICAL CONDITION
Patient: State budget
State-financed programs and jobs hovered near death as lawmakers grappled with a $1 billion shortfall throughout the session that alternately crashed and revived (whiplash, anyone?), according to revised revenue forecasts. The departments of Health and Human Services and Education took the majority of the cuts, but even small programs within Inland Fisheries & Wildlife couldn’t escape the scalpel.
Wreaking havoc were $125 million in delayed MaineCare reimbursements from the federal and state governments that infected hospitals and health care providers around the state, forcing layoffs and reduced services.
Prognosis: The last forecasting committee report identified an $840 million expected shortfall for the new legislative session, down from $1.2 billion. But more cuts loom, a trend likely to be enhanced by a new governor who’s pledged to bring the cost of state government down. Expect no help from state tax reforms, which were passed by lawmakers, then repealed by voters.
Patient: Unfunded retirement pensions
Like hardening of the arteries, the funding problem within Maine’s state retirement pension fund has been building for decades. Insufficient allocations coupled with looming peak retirement years has created a $4 billion unfunded liability in the Maine Public Employees Retirement System. Projections call for a payment of $916 million in the 2012-13 state budget to pay down the debt — nearly $300 million more than in the previous biennial budget. Payments are expected to exceed $800 million per year by 2020 to meet a constitutional requirement that the debt be paid by 2028.
Prognosis: Who in the private sector still has pension plans? Lawmakers are talking about switching to a defined contribution plan for all new state employees and amending the constitution to extend the repayment period.
Patient: Infrastructure
The osteoporosis weakening Maine’s roads, bridges, culverts, dams and other underpinnings continues to need more attention than the state can muster, despite transportation topping the list of stimulus fund projects. According to the American Society of Civil Engineers, 36% of Maine’s bridges are deficient or obsolete and 29% of its roads are poor or mediocre. Municipal wastewater needs continue to rise while the primary finding mechanism, the State Revolving Fund, is set to expire in 2011.
One small bright spot: More than $38 million in federal funds arrived in 2010 to help extend Amtrak’s Downeaster to Brunswick, but its completion date is still a couple of years away.
Prognosis: Tight state budgets aren’t likely to resolve this, but Maine voters have generally stood behind bonds to finance infrastructure improvements.
STABLE CONDITION
Patient: Energy projects
Large-scale energy projects are keeping a steady beat, despite a dearth of private investment. More than $12 million in Department of Energy grants helped create an offshore wind center through the University of Maine. Portland’s Ocean Renewable Power Co. successfully generated grid-compatible electricity from its test tidal turbine submerged in the waters off Eastport and a $1.4 federal million grant is helping to establish a marine energy center there to manufacture turbines and create 75 jobs.
Central Maine Power’s $1.4 billion Power Reliability Project successfully negotiated federal and state regulatory approval and found common ground with competing projects over a two-year period. CMP intends to upgrade or build 440 miles of transmission lines across the state. Up north, Maine & Maritimes Corp., parent company to Maine Public Service, was acquired by Canada-based Emera, saving the company nearly $1 million annually in operating costs.
Liquefied natural gas projects continue to slide by on life support. Calais LNG withdrew its state application for a $1 billion terminal after failing to replace a major financier, but promises to persevere. Meanwhile, Downeast LNG awaits a final OK from federal authorities for its $400 million project in Robbinston. Other LNG proposals pitched for Maine have been carted off to the morgue.
Prognosis: Financing remains the boogeyman thwarting investment in this industry. Higher natural gas prices will spur private investment in energy projects.
Patient: Pulp and paper
After one of the worst years in history, Maine’s paper industry righted itself, thanks to fuel tax credits and a rebounding pulp market. Sappi Fine Paper North America announced a $36 million investment at its Skowhegan mill to reduce oil consumption by increasing its use of black liquor, a renewable fuel generated as a byproduct of the pulping process. Verso won a five-year electricity supply contract from the Public Utilities Commission that will help the Bucksport mill secure financing to convert from fossil fuels to a biomass boiler. Madison Paper is also planning a switch to a biomass boiler and nailed a $357,000 grant from Efficiency Maine to help.
Twin Rivers Paper Co., formerly Fraser Papers, is choosing to truck its goods while a battle between competing rail lines ensues over access to the Madawaska mill. In addition to some stimulus funds, Congress also gave Maine mills another boost: tariffs on imported coated paper from China and India.
Prognosis: Ready to upgrade to Improving, but keep an eye on those global threats.
IMPROVING CONDITION
Patient: Military facilities
Brunswick Naval Air Station is finding new life as the home of Kestrel Aircraft, an aircraft manufacturer; Molnlycke, a medical foam manufacturer; and information technology startup Resilient Communications. All are gearing up for 2011 openings, ultimately providing 300, 100 and 150 jobs, respectively. And Auburn developer George Schott completed his purchase of 702 housing units on the former base, while the Midcoast Regional Redevelopment Authority expects to own the land underneath them when the property transfers from the Navy next year.
To the south, Portsmouth Naval Shipyard in Kittery expected to hire as many as 360 people after winning a contract to service a new fleet of Navy submarines that’s expected to keep it, er, afloat for the next 10 years. One of the few military casualties of the year: Bangor Air National Guard’s fueling wing lost 20 jobs and is in danger of being scrapped entirely.
Prognosis: Defense industries rarely suffer during war times. And BNAS’ reuse seems poised for flight.
Patient: Tourism
Lousy weather paired with a faltering economy in 2009 made for anemic year in tourism. But Mother Nature cooperated this year, providing a series of balmy days that restored Maine’s title as Vacationland. Cheap lobster didn’t hurt either. More than 13.7 million day travelers visited the state this summer, according to the Office of Tourism.
A large chunk of those tourists (more than 200,000) came via cruise ships, which set records at Mount Desert Island and Portland.
Prognosis: The enduring appeal of the way life should be. ‘Nuff said.
Patient: Broadband
The happy beneficiary of targeted stimulus funds, Maine’s high-speed Internet service took some huge leaps in 2010. FairPoint promises to reach the 83% service mark by year’s end, while four providers in northern Maine split more than $10 million in stimulus grants expanding access there. Meanwhile, Maine Fiber Co.’s Three-Ring Binder project, the recipient of $25 million in stimulus funds, began building its 1,100-mile broadband network.
Prognosis: Good momentum, but it needs to be sustained for Maine businesses to have a prayer staying competitive in an increasingly connected world.
Patient: Fisheries
The National Oceanic and Atmospheric Administration suffered a few abrasions after a federal audit found the agency had misused millions in fines, some of which were assessed and enforced unfairly on fishermen in the Northeast, according to an inspector general’s report. The feds gave Maine’s ailing groundfishermen a hand: raising the annual catch limit on pollock from 6 million pounds to 36 million.
Lawmakers here revised the gruesomely named lobster mutilation law to allow processing of claws and split tails, which had been banned. The change is expected to boost last year’s $228 million catch.
Prognosis: A healthy supply, but no bets on dock prices.
READY TO DISCHARGE
Patient: Gaming
This patient is ready to bolt. A resounding victory at the polls for a $184 million casino in Oxford is shifting this venture into overdrive, while Biddeford has thrown down the welcome mat to woo harness racing away from Scarborough.
Hollywood Slots continues to roll, reporting $60 million in revenue in 2009, a figure it claims could be increased by $14 million if it were allowed table games.
Prognosis: Pick your spot at the table. Gambling is here to stay.
Patient: Medical marijuana
Voters endorsed a state-approved dispensary system for pot, prompting eight storefronts to open for business.
Prognosis: Eased symptoms of glaucoma, chemo and other ailments, tempered with unbridled snacking.
Patient: Wind farms
Few respiratory problems here. TransCanada’s second Kibby Mountain wind farm went online this year and state regulators gave approval for a scaled-down project in Franklin County. First Wind expanded its Stetson wind farm with a new installation on Rollins Mountain following numerous unsuccessful lawsuits and appeals by a citizens’ group, and hopes to expand to Bowers Mountain next year, despite an abandoned IPO.
Island residents near Vinalhaven are seeing a roughly 3-cent per kilowatt-hour reduction in their electricity bills, thanks to a $14.5 million wind power project that went online this year despite protests over noise, and prompted study by other municipalities interested in community wind projects.
Prognosis: Maybe Dylan was right. The answer could be blowin’ in the wind.
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