Sticking it out
Slow growth predicted
- Economic gains two years out
- Corporate taxes fuel revenue surplus
The state’s Consensus Economic Forecasting Commission expects Maine’s economy to continue slow growth for the rest of this year and next, with significant growth at least two years away.
“The pessimism/optimism balance has changed and has changed for each of the two years we are looking at,” said Charles Colgan, chair of the commission and an economics professor at the University of Southern Maine. “We did raise our forecast a little bit for employment growth in 2010, we had been very pessimistic about it, and we do see a little more recovery there. But in 2011, we are more pessimistic.”
That will translate into a little more revenue this budget year and possibly a little less in the next budget year. The growth projections will be provided to the Revenue Forecasting Committee for its meeting next month to review the economic forecast and revise projections.
“We look at personal income in our forecast,” Colgan said, “but almost all of the income gains in the national economy in the last two years have been on the business side. “
Mike Allen, research director for Maine Revenue Services, said projections made earlier this year for corporate income taxes were “way off.” Last January, the national projection was 9.6% growth in corporate revenues for 2010. “They are now predicting an increase of 35%,” he said. “Corporate profits on the whole are continuing to do better than expected.”
Corporate income taxes have beat estimates for more than a year, serving as the source of much of the state revenue surplus, Allen said. “I would say that the top 25 corporate taxpayers account for 50 to 70% of the corporate income tax revenue for the state,“ he said.
Allen, who serves on the revenue forecasting group, said state revenues, while slightly above estimates and above last year’s levels, are still below those of two years ago and indicate how hard the state has been hit by the recession.
Glenn Mills, an economist with the Department of Labor, said the job outlook appears to have turned a corner at the first of the year, with job levels fairly stable. “The unemployment rate is down, but that is really due to a decreasing labor force and not because of rising employment,” he said. The commission expects job growth of a little over 1% next year, which translates to about 6,000 jobs.
Mainers exhaust unemployment
- Jobless rate upturn triggers cutoff
- Thousands to lose benefits after Nov. 30
When Maine’s unemployment rate fell in September, it was considered good news. But the drop signaled the loss of extended unemployment benefits for about 2,000 Mainers, and if Congress fails to act this month, thousands more will lose benefits.
“That’s the way Congress set up the extended benefits, in tiers based on state unemployment rates,” said Labor Commissioner Laura Fortman. “When we went below 8% in September, it took our rolling three-month average down below the trigger for that level of extended benefits.”
Maine’s rate was 7.7% in September, well below the national rate of 9.6%. Congress has passed extended benefits over the course of the recession and has set up a complicated system in which benefits max out at 93 weeks in Maine, not 99 weeks as in many states, Fortman said. “We had to develop a matrix to keep up with all of the conditions and terms put on each of the extensions that Congress has passed,” she said.
Her staff is working to determine who may exhaust benefits before the end of this month. “Thousands more” are expected to lose benefits at the end of November if Congress does not further extend unemployment insurance benefits, she said.
In addition to the basic 26 weeks of benefits paid from the state unemployment trust fund, Congress has extended benefits well beyond the state program limit to 99 weeks for those in the hardest hit regions of the nation. They are likely to consider another extension in this lame duck session.
“People are still hurting and we need to have a further extension of unemployment benefits,” said U.S. Rep. Chellie Pingree. She sought a longer extension than was passed in September when Congress voted to extend benefits to Nov. 30.
U.S. Rep. Mike Michaud said he hopes an agreement can be worked out for an extension that “cleans up” all of the various differences in the existing law and at least extends benefits through January, when the new Congress takes office.
Sen. Susan Collins said whether she will support another extension depends on how it is structured, while Sen. Olympia Snowe advocated for a consensus on how to extend benefits in a fiscally responsible manner.
State eyes merging psych hospitals
- Bangor, Augusta facilities targeted
- Lawmakers startled by proposal
The Department of Health and Human Services is moving to merge the management of the state’s two psychiatric hospitals, Dorothea Dix in Bangor and Riverview in Augusta.
“We have wanted to consolidate the administration of these two hospitals,” DHHS Commissioner Brenda Harvey said. “This would be more efficient, to maximize the use of each others’ strengths and to minimize the challenges.”
Legislation is being prepared for the next governor and Legislature that would formally put the two hospitals under one management, an arrangement that would save money, Harvey said. “We have already moved forward in some areas,” she said. “For example, there is a new COO for both and we have merged the quality assurance people and the training person is for both.”
The department would also like to put both facilities under one license, but Harvey said she is not sure that a national accreditation agency would allow a single license for the two campuses. “We know we need to do everything we can to reduce costs without affecting the quality of care,” she said. “We think this is one way to do that.”
Some savings can easily be identified, such as eliminating one of two chief operating officers, she said. Others are more difficult and will depend on the level of administrative merging that national regulators will allow, she said. “I don’t want staff to get the message that a decision has already been made,” she said. “That will really be up to the new governor and the new Legislature to decide.”
Harvey’s proposal was first revealed at a recent meeting of the appropriations committee and surprised lawmakers. “I don’t think anybody on the committee knew anything about this,” said Rep. Emily Cain, D-Orono, House co-chair of the panel.
There have been several proposals over the last 30 years to close the Bangor hospital and have one state-operated psychiatric hospital. “We have to be careful with terms like consolidation, coordination, merging,” Cain said. “Those mean very different things to different people.”
Harvey said both facilities are a fraction of their former sizes and are already cooperating in many areas. She said her office and Gov. John Baldacci have made it clear they have no plans to close either facility.
Mal Leary runs Capitol News Service in Augusta. He can be reached at editorial@mainebiz.biz. Read more of Mal’s columns here.
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