August 2008 Archives

Not surprisingly, Maine is not the only northeast state to worry about its competitiveness with New Hampshire.  Vermont also struggles with many of the same issues that Maine does . . . high taxes, too many regulations, anti-business political climate, etc.

Thanks to MHPC's sister free-market organization in New Hampshire--the Josiah Bartlett Center--I have become aware of this very interesting study by the Atlantic Institute for Market Studies based in Halifax, Nova Scotia.

The author of the study is Dr. Art Woolf from the University of Vermont and is titled "A River Divides It: A Comparative Analysis of Retailing in the Connecticut River Valley of Vermont and New Hampshire."  From the executive summary:

"This study examines the nature and extent of changes in retailing activity in the border counties of Vermont (Essex, Caledonia, Orange, Windsor, and Windham) and New Hampshire (Coos, Cheshire, Sullivan, and Grafton) over the past 40 years.  The border counties have exhibited similar rates of population growth over that period of time, but the economic growth rates of the two regions have diverged significantly . . . New Hampshire's border county stores are able to offer lower prices to consumers than their Vermont counterparts primarily because of Vermont's sales tax.  The study also presents evidence that Vermont's bottle deposit law has affected the location of larger supermarkets in the border region . . . the study finds that, if Vermont had not implemented its sales tax, Vermont's border counties would have 1,900 more retail jobs and $322.7 million more in retail sales than existed in 1997."

The only thing I would add to the study is differentials in excise taxes, especially cigarette, alcohol and gasoline, also add to the tax differential driving cross-border shopping and business relocation.

While this question has tasked the human brain for hundreds of decades, the answer to a similar question is much more apparent:

Which came first - the Taxes or the Spending?

Even though it may seem the case... the most aggressive politicians don't intentionally raise taxes faster than they can spend the money.  (It DOES happen occasionally, when tax rates are so high the revenues outpace expectations - creating that ear-to-ear grin on a politician's face when they can jump in front of a TV camera and claim to have a "surplus" to spend!)

But no.  There's no "surplus."  There's never a "surplus!"  And there won't be a "surplus."   

Here's why:   "It's the Spending, Stupid!"

But how did it get this way?

Ross Perot liked to repeat: "politicians buy your votes with your money," a statement that has been true since at least the Roman Republic.  The worst part of this observation by the little guy from Texas, is that there is always another election - with more votes to buy, more promises to fund forever, and more taxes to raise!

Government Spending is a financial sink-hole because it includes the checks written today and, more importantly, the promises to write exponentially more and larger checks in the future.  It's the long-term interest on bonds that paid for short-term projects.  It's hiring someone who can never be fired.  It's paying lifetime retirement and health benefits for someone who stops working in their forties.  It's "entitlement" programs that create multi-generational recipients who become trapped in dependency with no incentive to become self-supporting and no time-limits on their monthly checks.  It's paying millions of dollars studying moths' flight patterns, thorns on rose bushes, and hiring rooms full of psychologists to determine that, yes: teenagers without adult supervision will experiment with sex and alcohol.

Here in Maine, most people seem to agree that our tax dollars are wasted in criminal-theft proportions... then send the same politicians back to Augusta with one more chance to "fix" things. 

Pssssssst:  Unless Maine's elected leaders are bound by law to control spending, they will not. 

Please don't be fooled when politicians float "trial balloons" about shuffling lower Income Tax rates with higher Sales Taxes, increased Fees, higher Permit Costs or simply passing off more Maine taxes on tourists and seasonal residents.  The words are meaningless if they don't control spending.

So Spending does come first. 

And Spending must be controlled before we can touch taxes

According to a new survey by United Benefit Advisors Inc, an employee benefit advisory company, enrollment in Health Savings Accounts (HSAs) has almost doubled in the past year.  Now 11% of those privately insured are enrolled in HSAs compared to 6% last year.  HSA-compatible plans now account for 13% of all health plans offered by employers.

A Health Savings Account ties a savings account with a low premium, high deductible health plan.  That means that the individual, not the insurance company, is controlling the first few thousand spent in health care consumption.  Typically, after a $2,500-$3,000 deductible is met, the insurance company pays 100% of health care costs.

HSAs encourage the individual to take ownership of their own health, focus on preventative care, make good health choices and to be smart price and quality shoppers when using health care.

To learn more, you can read my overview of HSAs.

Lots of lipstick being applied to the school district reorganization pig this week. The Department of Education, always looking on the bright side, reported this week that "half of all Maine students go to a district with an approved reorganization plan."  According to the Kennebec Journal's reporting, "the department has approved six reorganization plans and 39 alternative plans."

Sounds like things are going well!

What is left unsaid, though, is that none of the 39 "alternative" plans consolidated anything. Under the law, districts already larger than 2500 pupils, which would be all of the state's largest school districts, were allowed to avoid consolidation altogether.

What of the six approved plans that actually consolidate districts?  Well, the state's website seems only to list five. One of them, in Bath, predates the reorganization law, but that does not stop the state from taking credit for it.  The SAD 53/SAD 59 plan was defeated by voters in Madison.  A July 3 report in the Forecaster suggested that Falmouth was getting cold feet over its approved plan and sought to pull out of it, which does not bode well for voter approval this fall.

That leaves the SAD 16/Monmouth/Dresden plan, with 2450 kids, and the Sabattus/Wales/Litchfield/Oak Hill CSD plan, with 1600 kids, as the only two consolidation plans that have been approved by both the commissioner and the voters of the districts involved.

4050 kids out of 200,000? Little less than "half of Maine students" being in consolidated districts, I would say...
  

Recently, Fraser America released a new study titled "Measuring Entrepreneurship: Conceptual Frameworks and Empirical Indicators."  After reading through the study I noticed a wide deviation between Maine and New Hampshire on several entrepreneurial metrics:

1)  Venture capital invested (by destination) per capita, 2005:  Maine ranked 10th from the bottom at $2.36 while New Hampshire ranked 7th highest at $90.19.

2)  Total industrial R&D expenditure (performing) as a percentage of GDP, 2003:  Maine ranked 18th from the bottom at 0.5 percent while New Hampshire ranked 8th highest at 2.8 percent.

3)  Total academic R&D expenditure (performing) as a percentage of GDP, 2003:  Maine ranked 3rd from the bottom at 0.19 percent while New Hampshire ranked 15th highest at 0.52 percent.

4)  Number of patents granted (all types) per 1,000 people, 2005:  Maine ranked 23rd from the bottom at 0.121 while New Hampshire ranked 9th highest at 0.413.

Note: Ranks are out of 60 since it includes all U.S. states and Canadian Provinces.

Last month, we released a report entitled District Consolidation and the Threat to School Choice: 15 Reorganization Plans to Watch. In it, as the title makes clear, we identified a handful of communities where school choice is now available, but where it may be threatened by ongoing district consolidation efforts.

There is good new out today regarding one of the consolidation proposals we highlighted.  According to a report in the Morning Sentinel, under the consolidation plan for the towns of Wiscasset, Alna, Westport Island, Whitefield, Windsor, Chelsea, Palermo and Somerville,

"...school choice applies to students from kindergarten through grade 12 in Alna and Westport Island; to high-school students only in Chelsea, Palermo, Somerville, Whitefield and Windsor; and to no Wiscasset student."

In other words, school choice options will remain in place where they have traditionally been, as long as the plan in its current form is passed by voters in the eight towns.  There is apparently some rumbling in Wiscasset about how high a share they will pay for the new regional district, among other concerns.

Assuming the plan does eventually pass, will Wiscasset parents remain happy with fact that every other high schooler in the district has school choice but them? School choice is not out of the woods yet, but good to see a plan being put forward that actually preserves choice.

A recent Wall Street Journal editorial about Maryland's recent cigarette tax hike should give pause to Maine lawmakers who wish to further increase Maine's high cigarette tax.  The article states: "Politicians in Annapolis are scratching their heads wondering what happened to all those chain smokers who were suppose to help balance Maryland's budget.  Last year the legislature double the cigarette tax to $2 a pack to pay for expanded health-care coverage.  Eight months later, cigarette sales have plunged 25% and the state is in fiscal distress again . . . residents in Maryland's Washington suburbs can shop in nearby Virginia, where the tax is only 30 cents per pack, and save at least $15 per carton."

Of course Maine's "Virginia" is New Hampshire where cross-border shopping by Mainers is a well-known phenomena.

A Virginia legislator has launched a school choice advocacy group there called School Choice Virginia.  Disappointed at his lack of success passing school choice legislation, Delegate Chris Saxman took the initiative and formed a statewide school choice organization, complete with its own webpage.  The launching of the advocacy group won praise from the Richmond Times-Dispatch, which today published a column from Saxman arguing in favor of school choice. Predictably, the teacher's union in Virginia responded with a call to oppose choice, which tells you all you need to know about how interested the entrenched powers are in maintaining the status quo.

Isn't in time for a statewide school choice advocacy group in Maine, one of the few states that actually has school choice?

The bloggers at the Fordham Foundation happened upon this bit of news from the Miami Herald the other day. It seems as though parents and children are exercising their own kind of school choice in Broward County, Florida, by faking residency in order to get into better schools.  Officials in there have a come up with a deterrent for parents who try to get their kids out of failing schools and into better ones - five years in jail.

"Until now, lying about where parents live to get their child into a favorable school was against district policy and Florida law, but it was only a second-degree misdemeanor and was seldom enforced.

Under the new policy, the Broward state attorney's office has the the right to charge boundary-hoppers reported by the district with low-level felonies, which are punishable by up to five years in prison and $5,000 fines.

''There shouldn't be school shopping,'' said board Chairwoman Robin Bartleman."

She's not kidding. $5000 and five years in jail for lying to get your child in a better school.

If only those parents had the resources available to Massachusetts governor Deval Patrick, who, despite his own private school education, appears largely unwilling to create more school choice options in his own state.

No word, by the way, on the punishment in Massachusetts for faking your way into a better school.

Recently Fraser America released their 2008 Economic Freedom of North America study that I blogged on once before.  The study ranks all U.S. state and Canadian Provinces based on their level of economic freedom.  Unfortunately, Maine (ranked 49th out of 60) has the third lowest level of economic freedom out of all the U.S. states with only Mississippi (tied, 49th) and West Virginia (55th) scoring the same or lower.  The good news is that Maine has more economic freedom than all of the Canadian provinces with the sole exception of Alberta (2nd).  As usual, the New England state with the most economic freedom is New Hampshire  (7th) followed by Massachusetts (14th), Connecticut (20th) and Vermont (44th)--all ranked higher than Maine.

A couple of weeks ago, I suggested in this space that the school consolidation effort was not going as well as the administration might hope. The Freeport/Durham/Pownal merger plan, at one point turned down by the Freeport school committee, eventually got the green light from the board and is now in the hands of the commissioner. The plan, which eliminates school choice in Durham and Pownal, will likely go before voters in those three towns in November.

Up in Winslow, though, the school board shot down the proposed China/Winslow/Vassalboro/Oakland/Sidney/Belgrade/Rome merger by a unanimous vote. We have identified this merger plan as worthy of careful scrutiny because of the potential implications for school choice, but according to reports, Winslow's rejection of the plan had more to do with the sheer size and scope of the proposed plan. It was reportedly observed by one Winslow resident that even "Caesar's empire" did not "extend from Rome to China."

Two other boards take up the plan tonight.