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March 22, 2010 Public Engagement

Laying a foundation | Maine's economy depends on maximizing public-private partnerships

By Garrett Martin

“Public Engagement” is a new monthly column in Mainebiz that will address economic policy matters affecting the state. Contributors will be staff from the Maine Heritage Policy Center in Portland and the Maine Center for Economic Policy in Augusta.

 

Two companies go at it in Augusta. At issue: How to best deliver broadband Internet access to rural Maine. Of course, a lot more is at stake.

One company, FairPoint Communications, dominates the current broadband delivery system — a system built by using public dollars to leverage private investment and by taking advantage of public rights of way that date back to the New Deal Rural Electrification Administration created in 1935.

The other business, Maine Fiber Co., proposes to upgrade Maine’s fiber optic network and make it more accessible to broadband service providers, including FairPoint. This company plans to invest $7 million in private capital and $25.4 million in federal funds received through the American Recovery and Reinvestment Act passed in February 2009.

A bill pending in the Maine Legislature, LD 1778, would give Maine Fiber the access it needs to bring its plan to fruition, access already accorded to utilities and cable TV providers. FairPoint strongly opposes this bill. By the time this article goes to press, the fate of LD 1778 will likely have been decided.

LD 1778 highlights longstanding disputes over the relationship between the public and private sector, future prospects for development in rural Maine and the most effective path out of the worst recession since the Great Depression.

All too often, this debate pits government against the private sector in a fruitless either-or proposition.

Rural revitalization

Historically, combining public and private sector investment and innovation has helped us to achieve our greatest advances. Development and expansion of computer technology, creation of the Internet and other strides in communication are examples of the benefits of such partnerships.

The public sector also plays a vital role in setting the rules of the game. In the case of LD 1778, the final decision may have enormous consequences for rural Maine, perhaps tipping the balance between economic growth and continued stagnation.

Rural Maine’s long-term economic prospects are inextricably tied to both public and private action, and the outcome will ultimately affect the entire state. Our rural areas are at the heart of our iconic Maine brand that symbolizes quality, hard work and pristine natural places. Public decisions can either help preserve and enhance this brand or allow it to become a thing of the past. For example, MECEP is working with Bowdoin College economist David Vail to identify potential investment strategies to enhance tourism in rural Maine.

Our current state funding approach to providing services in rural Maine is likely unsustainable. The governor’s school consolidation initiative acknowledges this. Unfortunately, it was not part of a more comprehensive rural development strategy. In order to spread the fiscal burden for key public investments more equitably and reduce our reliance on them, the next governor must implement a strategy that fosters economic activity in rural Maine.

First things first

The biggest concern for most Mainers, rural and urban alike, is jobs. Diminished private consumption and investment have left a huge hole in our economy.

In a recent op-ed titled “Address jobs now, deficits later,” Larry Mishel, president of the progressive Economic Policy Institute, and David Walker, CEO of the conservative Peter G. Peterson Foundation, agree that under current economic circumstances “public spending can help compensate for the fall in private spending, and help stem the pain of substantial job losses.” They also agree our most immediate concern must be getting people back to work.

ARRA helped put the brakes on the downward economic spiral by infusing almost $1 billion into the Maine economy. This helped create or save 10,000 jobs across the state, according to the President’s Council of Economic Advisers.

But we’re not out of the woods yet. As keynote speaker at MECEP’s 2010 tax and budget conference in January, Mishel emphasized that the federal government must provide additional fiscal relief to state and local governments and increase public investment in infrastructure.

In 1930, 10% of rural homes had electricity; 10 years later, thanks to federal action through the Rural Electrification Administration, 90% of rural America had power. The decision on LD 1778 may not be as transformative, but it has the potential to strengthen rural Maine’s connection to the global economy.

This is no time to be timid. Congress has taken halting steps with the recent passage of a $15 billion jobs bill but must do more to secure our nation’s economic health. State lawmakers must also take steps to enable Maine to realize the full benefits of federal assistance and use the state’s bonding authority to further job creation and infrastructure improvements. The future of Maine’s economy, rural and urban, depends upon decisions we make today and effective public-private partnerships that result in shared prosperity.

 

Garrett Martin is associate director of the Maine Center for Economic Policy. He can be reached at gmartin@mecep.org. Read more of Public Engagement.

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