December 2008 Archives

Yesterday, the Federal Reserve Bank of Philadelphia released their latest State Coincident Index for November 2008.  The data shows a deepening of Maine's economic recession.  Maine's index has fallen 2.94 percent to 141.94 in November 2008 from 146.23 in November 2007--the second largest drop in New England.  The largest drop belongs to Rhode Island at -5.59 percent followed by Vermont (-1.81 percent) and Connecticut (-0.94 percent).

Only two states showed positive gain:  New Hampshire (0.86 percent) and Massachusetts (0.32 percent).  However, only New Hampshire is still showing growth on a month-to-month basis.  While Massachusetts' index is still higher than their November 2007 index; their index has been steadily falling since reaching the peak in April 2008.

As Maine's new Legislature begins business in January, this latest data shows that they should be prepared for more bad news on the economic and, correspondingly, the revenue front.  Click "continue reading" to view chart.

Today the U.S. Census Bureau released their July 2007 to July 2008 population estimates which includes net domestic migration.  For that time-period, Maine lost 2,063 residents to other states--a larger out-flow than the previous year's loss of 963 residents (revised downward from a loss of 717).  In the attached chart (click "continue reading to view), it is clear that Maine's net migration is on a steep downward trajectory.  Combined with net international in-migration and natural increase, Maine's total population grew at an anemic 1,058 people.

In last year's blog on this topic, I found that it was very likely that New Hampshire's population would exceed Maine's population this year.  That threshold was not crossed this year as Maine continues to hold a very small lead of 647 people.  For statistical purposes, this is a dead-heat.  However, the fact that New Hampshire's population will exceed Maine's is all but given in the near future considering New Hampshire's yearly growth is 3.5 times faster than Maine's (3,553 versus 1,058)--mostly due to New Hampshire's higher natural growth (births minus deaths).

Overall, net out-migration is not just a problem faced by Maine, but also all of New England:  New Hampshire (-2,473), Massachusetts (-18,675), Rhode Island (-8,816), Connecticut (-14,985) and Vermont (-1,703).

Today the Bureau of Economic Analysis released state personal income data for the third quarter of 2008.  For the third quarter, 2008 Maine's private sector share of personal income rebounded slightly from the second quarter to 66.38 percent from 66.13 percent (revised).  The rebound, mirroring the national average, was due to the wearing off of the effects of the federal stimulus package.  As a result, personal current transfer receipts fell to $9.498 billion from $9.649 billion.  However, this was partially offset by an increase in government compensation--especially state and local government compensation to $4.202 billion from $4.171 billion. (click "continue reading" to view Chart)

Note that ME's trend line over the time-period shows a disturbing decline.  Although the trend line for the national average also shows a very slight downward slope, Maine's trend line shows a much steeper drop than the national average.  As such, Maine's private sector has been shrinking at significantly faster rate than the national average.

Former IBM CEO Louis Gerstner had an interesting piece in yesterday's Wall Street Journal, in which he suggests a handful of education reform options:

"- Abolish all local school districts, save 70 (50 states; 20 largest cities). Some states may choose to leave some of the rest as community service organizations, but they would have no direct involvement in the critical task of establishing standards, selecting teachers, and developing curricula.

- Establish a set of national standards for a core curriculum. I would suggest we start with four subjects: reading, math, science and social studies.

- Establish a National Skills Day on which every third, sixth, ninth and 12th-grader would be tested against the national standards. Results would be published nationwide for every school in America.

- Establish national standards for teacher certification and require regular re-evaluations of teacher skills. Increase teacher compensation to permit the best teachers (as measured by advances in student learning) to earn well in excess of $100,000 per year, and allow school leaders to remove underperforming teachers.

- Extend the school day and the school year to effectively add 20 more days of schooling for all K-12 students."

This is an interesting mix of approaches, some more promising than others. The idea that the state can run schools more efficiently than smaller districts can is questionable, to say the least. I can't think of anything the state does efficiently. I expect national standards to get a big push, though - it is popular on both sides of the aisle. Why? Because it is clear that the Feds made a mistake in allowing each state to set their own achievement benchmarks.  As a result, there is enormous variation from state to state with regard to what constitutes "proficiency" in reading, for example. National testing will likely follow national standards. The NAEP test, administered by the U.S. Department of Education, is generally seen as an effective national test, against which many states benchmark their own state tests.  Extending the school day and year makes sense - we trail many nations in the amount of schooling we ask kids to do - but only if the schools become more effective at what they do. Having kids spend more time in bad schools makes no sense at all.

Gerstner's fourth suggestion, related to teacher quality, is, in my mind, the key piece.  None of the rest of it matters if you do not have top-quality teachers in the classroom. It is also the most controversial piece of the puzzle, as it would require the recently-elected Obama administration to take on the recalcitrant teachers' unions, who are reflexively resistant to any attempt to tie teacher pay to student outcomes, or to make it easier to remove ineffective teachers.  Whether President-Elect Obama is willing to move forward on teacher quality issues in defiance of the unions will determine the extent to which he is serious about making the kind of profound changes to our schools that leaders like Gerstner are suggesting.

Who he selects as an Education Secretary may tell us a great deal about the answer to that very question.