Cutting our way to failure | More investment and better public-private coordination needed for economic growth
How can the public sector and private sector work together to build an economy that works for everyone?
This is the question considered in “Making Maine Work,” a recent report issued jointly by the Maine Development Foundation and the Maine State Chamber of Commerce. The public sector and private sector must cooperate to create economic prosperity — there are vital public structures that private businesses and households need to succeed. These include coordinated investments in all levels of education so that Maine’s work force can meet the skill demands of growing employment sectors. Making health care affordable necessitates coordinated action to invest more in prevention, foster healthier lifestyles and cut costs. Not only can such action save public and private resources, it can also boost productivity.
The same lagging economy that has posed challenges to Maine’s households and businesses has also challenged the ability of local and state governments to respond to new demands and even keep up with old ones. The gas tax and other revenues that fund roads and bridges are projected to fall $720 million, less than what would be required to continue today’s reduced levels of road work. This follows five years of cuts at the Maine Department of Transportation that have included trimming the work force by 10%. The results of doing more with less potentially imperil our future safety and prosperity. According to the American Society of Engineers, 29% of Maine’s major roads are in poor or fair condition, and the U.S. Department of Transportation rates 19% of Maine bridges structurally deficient or functionally obsolete.
The struggles at MDOT underscore more broadly what is happening throughout state government. Those who say state spending is out of control are ignoring the facts. State General Fund spending in the 2011 budget is 12% lower than it was in 2008. Adjusted for inflation, 2011 appropriations are actually lower than those for 1999.
Against this backdrop, the non-partisan Office of Fiscal and Program Review projects that General Fund revenues will fall at least 14% below, or $800 million short, of the current two-year appropriations, even without any increase in health costs. Given reductions that have already been made, state government cannot simply get rid of the functions that the 14% projected shortfall represent. Another 14% cut in state aid to local education will effectively shift more of the burden of funding K-12 education to the local level and likely result in property tax increases. A 14% cut to higher education will likely increase tuition and make it even more difficult for Maine students to obtain the education and skills required for future employment. A 14% cut in health spending will likely mean that fewer people who need services will get them and, when they do obtain services, they are likely to do so in the least cost-effective manner, thereby increasing rather than decreasing the costs of health care for all of us.
Rather than spread the 14% cut across the board, what would happen if specific agencies were targeted? Getting rid of all state spending in the Departments of Agriculture, Conservation, Cultural Affairs, Environmental Protection, Inland Fisheries, Marine Resources, Public Safety, the Judiciary, Attorney General’s office, Governor’s office and Secretary of State’s office would meet only half of the target 14%. Should we really be forced to cut our law enforcement agencies and prosecutors, or any other department for that matter?
When we see someone failing to adhere to safety standards in the workplace, or a predatory lender trying to take advantage of an elderly client or a business doing damage to our property or water or air, we hope that the agencies charged with addressing such ills still have the capacity to do so.
Finally, less obvious but equally important are the impacts on both public and private sector jobs if state spending is reduced by 14%. Last January, MECEP found that a proposal to reduce $275 million from the state budget would have resulted in a loss of 7,000 to 10,000 jobs. A reduction of over $800 million could result in as many as 20,000 lost jobs. Considering that over 100,000 people are already unemployed or underemployed in Maine as a result of the recession, such additional job losses would be devastating and take years to recover from.
The next few years will be extremely challenging for Maine and its economy. Positioning ourselves for future prosperity requires a shared discussion and difficult decisions by public and private sector representatives. Unfortunately, the current discourse separates the public from the private and focuses almost entirely on radically reducing public investments and services. While it is right for us to demand the most cost-effective delivery of public services possible, we cannot simply cut our way to prosperity. The “Making Maine Work” report reminds us that the path forward requires more, not less, investment and better coordinated public and private sector responses to the challenges we face.
Christopher St. John is executive director of the Maine Center for Economic Policy and can be reached at cstjohn@mecep.org. Read more Public Engagement here.
Most Recent
Most Recent
Comments