November 2007 Archives

Today, the Kennebec Journal reports in a story by Susan M. Cover on the ongoing investigation into the failed $20,000,000 investment made on behalf of Maine's taxpayers by the State Treasurer David Lemoine. I will not rehash the story, but in a nutshell there is a very, very high probability that Maine's taxpayers will not ever see a dime of this $20,000,000.

What does this mean to the average Mainer? The lost $20,000,000 is the equivalent of all the state taxes paid ($2,691) by 7,432 average Mainers (estimate based on methodology from this previous study). Or, to put it in more political terms, it is almost the same number of people as represented in a single Maine House District (85 percent).

Put simply, these 7,432 Mainers would have been better off burning this money to stay warm this winter than sending their hard-earned money to Augusta. Sound preposterous, well, it certainly beats having to resort to stealing fuel oil.

In a new study by the Reason Foundation, Adam B. Summers explores the issue of Occupational Licensing. Why is this a problem: "While occupational licensing laws are billed as a means of protecting the public from negligent, unqualified, or otherwise substandard practitioners, in reality they are simply a means of utilizing government regulation to serve narrow economic interests. Such special-interest legislation is designed not to protect consumers, but rather to protect existing business interests from competition."

As a result of reduced competition, the economy suffers. The study found that "By restricting competition, licensing decreases the rate of job growth by an average of 20 percent. The total cost of licensing regulations is estimated at between $34.8 billion and $41.7 billion per year."

Not surprisingly, Maine is at the top of the list with the 3rd highest number of licensed jobs at 134. However, this is a region-wide problem with all New England states having above average licensing requirements: Connecticut (rank #2, 155); New Hampshire (rank #4, 130); Rhode Island (rank #7, 116); Massachusetts (rank #12, 1007) and Vermont (rank #15, 107). The "State Average" is 92.

Maine also has two licensing requirements that made "The Nation's Most Outrageous Licensing Laws" list--Beekeeper license and Prospector license. Other laws you may find particularly amusing: Manure Applicator (Iowa), Rainmaker (Arizona), Reptile/Amphibian Catcher (Michigan) and Turtle Farmer (Louisiana).

As if Maine legislators don't have enough to deal with in terms of tax reform/reduction, health care reform, budget deficits, etc. Now they should add occupational licensing reform to their agenda. Also, don't forget about the dismal liability climate in Maine either.

The state got more finger-pointing from the University of Maine system yesterday, as it continues to find a way to explain massive budget shortfalls. The blame this time is directed at the Community College system, which is apparently stealing kids away from USM and other UMaine schools. Seems strange though, that other colleges seem to be doing just fine. This August 2007 press release from Husson College in Bangor, which is just across town from Eastern Maine Community College, reports record enrollment, having adding an average of 100 students per year since 2000, despite the presence of EMCC.

Whats really wrong with our colleges? A new report out from Dr. Richard Vedder's Center for College Affordability and Productivity lays out 12 reasons why our universities seem to be spending more than ever while achieving less. Hint: It has to do with productivity or lack thereof.

The solution, by the way, is not more taxpayer funding. It is (surprise!) good old-fashioned free-market competition. Read the entire report here.

Last week, I became aware of a new report touting Census data claiming that between 2004 and 2006 Maine had gained nearly 6,000 people between the ages of 25 to 34 after falling by nearly 12,000 between 2000 and 2004. This sounded like good news, perhaps the flight of Maine's youth had reversed itself.

However, because of my own experience with Census data, I doubted that this was true. Census rarely has such dramatic swings in their population data between the decennial census simply because they are mostly estimates and projections. After some searching on their website, I found this spreadsheet.

This data presents a very different picture. Rather than gaining 6,000 people, Maine actually lost another 1,000 people between the ages of 25 to 34. The only good news is that the loss seems to have stopped between 2005 and 2006--although this data is still subject to revision. (click "continue reading" below to see the data in graphical form).

Apparently, the problem occurred when someone updated their table for the new 2006 Census data but failed to update the previous year's data which had been revised by the Census Bureau. As a result, the data was an apples-to-oranges comparison. This is an important lesson, especially for the media, to double-check facts before jumping to conclusions.

The Small Business & Entrepreneurship Council recently released their 2007 Small Business Survival Index, and Maine is paying dearly for its poor tax policies. We are ranked #47 in the tax portion of the ranking, in front of Iowa, Minnesota, and New Jersey.

SBEC's Raymond Keating includes a chart and explanation here.

What's worse is that CNN Money lists us in the 10 worst states for starting a business. Once again, we're not able to shake our now-deserved reputation for being an unfriendly business state - all because our elected officials refuse to enact laws that would attract jobs and people. Here's what the CNN Money web site says about Maine:

47. Maine
"Maine has so much scenic beauty," says Kerrigan, "but scenic beauty can't compensate for high taxes." Starting a business in the state could be as rocky as its coastline: Property taxes are the second worst in the nation, and personal income and capital gains taxes are also amongst the highest. On the plus side, Maine boasts a highly skilled population.

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Over the past few years, I've heard too much from current and former politicians, together with alleged policy experts, claiming that all we need to do is change our attitude - and then Maine will become more economically vibrant. They say that Mainers are too negative - and if we all just changed our attitude about our state, we'd be alright.

What? When will Augusta wake up and realize that it is our government that needs to change their attitude - not the harworking Maine people? The data doesn't lie. And we can either bury our head in the sand and wish these problems away - or we can demand substantive change from politicians. Lower our taxes, get rid of costly mandates, and stop the ridiculous and short-sighted band-aid solutions to simply get us from one budget cycle to the next.

Bill Becker

Thanks to a concerned parent in the UK who sued the education system, a British High Court ruled that Al Gore's movie, An Inconvenient Truth, could not be shown in public schools without an explicit disclaimer warning students of the partisan, political, and misleading nature of the film. The Heartland Institute's James Taylor reports fully on the matter...

Bill Becker

Today, MHPC released a new study on state government employment that finds Maine has too many state jobs when compared to the national average. The obvious problem is that Maine taxpayers are on the hook for this bloated bureaucracy to the tune of over $200 million. Less obvious is that government employment is bad for economic growth.

A recent article published in The Review of Economics and Statistics, November 2006 (non-gated version found here), found that: "We find a negative and statistically significant partial correlation between the percentage of the population employed in the public sector and the rate of growth, regardless of whether one considers federal, state, or local government. Moreover, we find no clear pattern of a less negative partial correlation at increasingly decentralized levels." Put simply, not only is government employment in general bad for economic growth, but it doesn't matter if it is at the federal, state or local level--it is all equally bad.

The authors go on: "However, the relationship might be nonlinear; for example, government might be good to a certain extent, but then become a negative influence as it expands further . . . [but] for federal, state, and local government variables entered linearly, the estimates are negative and significant, as in the original regressions." In other words, government employment is also bad for growth no matter the size of government.

In another unpublished paper, found here, the authors study the role of government employment in more detail. They conclude: "Given the ostensible goals of higher growth and/or more equitable distribution of income, our findings are not supportive of expanding the roles of government, in terms of employment, at any level. The U.S. government use of the labor force seems to be either unproductive or growth-hindering at all three levels of decentralization. Taken at face value, our findings seem to suggest for a rolling back of government activities; specifically for a release of government-employed labor inputs to the private sector."

Two month's ago, we had William Ardinger from New Hampshire speak to our monthly Dimillo's luncheon. Mr. Ardinger is a co-architect of New Hampshire's Business Enterprise Tax and he wrote this article which explains why it is good tax policy. For a more simple explanation on why the BET is a good idea for Maine, check out the actual form here. Yes, the form is the size of a postcard.

A couple of weeks ago, the Brunswick Times Record became one of the few major papers to editorialize against the state's school system consolidation plan. Today, the Portsmouth Herald joins in, finding that the troubles that Maine's southernmost towns are having with the new law reveal its deep flaws.

When Maine Gov. John Baldacci first announced his plans to consolidate Maine's school districts last spring, we were optimistic. In a far-flung state where it is not uncommon to find districts with as few as 300 students, a little district tightening, we reasoned, might not be a bad thing. But the devil, as they say, is in the details; and the details — as it is becoming increasingly clear — are creating a mess.

Read the full editorial here.

The BDN features a very good front page article this morning about how well the Greenville school has done despite its small size. Check out these statistics from the article:

Greenville High School is known for its high performance and academic excellence. It was recognized by Newsweek magazine last year as one of the top 1,200 schools in the nation...On average, 92 percent of Greenville High School graduates attend postsecondary schools. More than 89 percent of the students participate in co-curricular activities. Out of the 95 high school students, 23 participated in Advance Placement courses, and of those who took the courses, seven were named AP scholars. The school was one of the top 20 in the state in SAT scores last year. Students consistently score at or above the minimum requirements on Maine Educational Assessment tests in both mathematics and reading.

How did Greenville do this, by creating a single enormous school district? No. They worked with surrounding towns, on their own, and created an Education Service District, much as MHPC described in a research piece from nearly a year ago. Again, from the article:

Long before the state’s reorganization plan become law, administrators in Union 60, SAD 13 (Bingham) and SAD 12 (Jackman) had started a grass-roots effort to share services for property tax relief. As a result, Greenville and Jackman schools share a foreign language instructor and partner with a librarian, and the Jackman and Bingham schools share a music instructor and a technology coordinator. The three districts also had formed the Northwest Education Service District to begin consolidating administrative services. Their efforts won them a $25,000 Department of Education school efficiency grant.

The three school units making up the Education Service District projected that they would "save $360,000" through the sharing of educational services using their service district approach.

Today, despite all this, the school system is struggling to comply with the new state law. Community members are already pledging to resist the state's forced consolidation mandate.

Read the entire article here.

In all the talk of universal coverage, few admit that a Medicaid card often does little to increase access to health care. However, volunteer-staffed free clinics are doing just that across the country. With minimal government funds and no Medicaid money, free clinics are mostly staffed by volunteer (often retired) physicians, nurses and health care professionals. They provide free primary and preventative care to the truly uninsured and referrals to participating volunteer specialists and other health care providers.

These clinics help connect the uninsured to free sample medications or patient assistance programs provided by drug companies. They epitomize a local, charitable community response to the real needs of the uninsured.

However, states can do more to encourage these clinics by providing medical liability protection for the volunteer medical staff. Those states that do – unlike New York – have more clinics and increased help to the uninsured, as I recently noted in a NY Post op ed.

After approving similar liability protection, Virginia (978,000 uninsured) now has 40 such free clinics, according to the National Association of Free Clinics. North Carolina (1.4 million uninsured) has a similar provision and more than 50 free clinics.

Volunteers in Medicine, based in Vermont, also provides a model for setting up free clinics in numerous states.

Maine has liability protection to volunteer medical staff, but very few free clinics, according to the National Association of Free Clinics. As the state with the oldest median age, many retirees and 122,000 uninsured, we should be promoting this charitable, community-based endeavor as opposed to always turning to the government.

One tired theme we constantly hear in Maine is that "taxes do not matter" to businesses. Economics tells us that taxes are a cost of doing business--and all costs matter. So the other day the answer to this question came to me in my mailbox. A business called Commerce Clearing House, a national publisher of tax related reference books at the federal, state and local levels, sent me a solicitation letter and catalog. The letter states:

"If your company does business in more than one state, you can ensure compliance with state laws--and slash your tax bill at the same time--with the CCH 2008 Multistate Corporate Tax Guide. This time-saving reference increases your productivity by quickly targeting the information you need to design and execute a winning multistate tax strategy--one that conforms to all state requirements and improves your profit picture as well."

Note that they mention the cost-savings not once, but twice in that one paragraph alone. Clearly the private sector realizes that taxes matter. Otherwise CCH would not have stressed the cost-saving potential in their marketing material. Its only the public sector, or folks that depend on the public sector, who deny that taxes matter.

In addition, the cost-savings must be significant. The cost of the 2008 Multistate Corporate Tax Guide is $579 and runs 2,100 pages. Here are some of the not-so-fun tax questions you could answer from this guide:

"Is income tax nexus the same as sales and use tax nexus?
"Which states permit an S-corporation to file a composite return for non-resident shareholder?"
"Are delivery/shipping charges subject to sales and use tax?"

Here's an idea, why not require every lawmaker to sit down with a copy of this reference book and find the answer to these questions. Perhaps then we will get real tax reform.

The Bangor Daily ran a nice piece yesterday about our recent report on school district size and student achievement. In criticizing the report, though, Department of Education spokesman David Connerty-Marin seems to have muddied the waters with regard to why we are consolidating the school districts in the first place:

"Connerty-Marin said the school consolidation law was not designed to create larger districts as a way to save money; its primary focus was to improve instruction and results."

Hmmmm...A look at the Department's consolidation website indicates that one of the goals of this effort is to "Achieve real savings" and it seems to me that has been a constant theme. In fact, there is almost no mention of student performance in the school district consolidation law.

Connerty-Marin was slightly more revealing when he said that "You can’t implement the best teaching practices with 292 school boards and 152 central offices."

What does this mean? It means that one of the reasons we're merging the districts is to further consolidate educational decision-making, giving the state more power to "implement" whatever it wants. It is far easier to tell 70 school boards what to do than 292. In fact, Commissioner Gendron is making plans to have teachers submit to the state a syllabus for each class they teach to see if it meets with state approval. The merger of districts is beginning to look a bit like a gradual state takeover of schools, with the state dictating curriculum and methods of student instruction from on high.

Maybe that is why were doing all this consolidating.