July 2009 Archives

A few months back I posted on a disturbing trend showing Mainers were dropping out of the labor force which makes Maine's unemployment rate look smaller than it actually is.  Unfortunately, that trend has worsened.

Between January 2009 and June 2009, Maine's labor force has shrunk in each month for a total loss of 9,258 people.  A few more months of this and Maine will likely break a few records.  First, the 5-month consecutive decline ties the record set between June-October 2000 (data goes back to 1976); however, the labor force only declined by 3,527.  This record is in sight.

Second, in absolute losses, the current record was set between April and July 1991 with a decline in the labor force of 11,280 (the labor force was smaller then so this was a more significant decline than the same absolute decline would be today).  This record will be harder to top.

Adjusting for the declining labor force, Maine's "shadow unemployment rate" is 14 percent higher than the reported rate--9.7 percent versus 8.5 percent (click "continue reading" to view chart).  More distressing, the shadow rate is higher than the national unemployment rate of 9.5 percent.  Since January, 2009, Maine's shadow rate has tracked the national unemployment rate.  The lower reported rate is an illusion.

This leads to the inevitable question: "where are these people going?"  In the best case scenario, these folks are waiting on the sidelines waiting for the job market to improve before jumping back in.  In the medium case, these folks are taking early retirement but, hopefully, are still living in the state.  In the worst case, these folks are fleeing the state to greener pastures.  As I reported here, Maine is already a net out-migrant state for two years running.  My gut says its likely a mixture of the last two.

With state budget writers confronting a growing deficit, Maine's K-12 education spending, which is the largest single expenditure of state dollars, is likely to attract a lot of attention. Undoubtedly, the argument will be made that Maine schools cannot endure further cuts to K-12 spending, and that undertaking such cuts will do irreparable harm to educational outcomes.

That argument has became tougher to make with the release of state K-12 spending data by the U.S. Census Bureau. According to the Bureau's most recent calculations, Maine's 2006-2007 K-12 spending was $11,387, which ranked the state 12th in the nation.

Maine spends $1700 per-pupil more than the national average, says the Census.  With little over 190,000 students in Maine schools, that $1700 per-pupil adds up to $340 million that Maine is spending on its schools over and above the national average.

Are the results we're getting worth that amount of extra spending? Our students do tend to score above national averages on standardized tests, but how much of that is the product of our schools and how much is due to the unique demography of Maine's student population, which is overwhelmingly white and English-speaking?  Wouldn't such a population be expected to exceed national averages for academic performance?

The question of how much educational bang we're getting for the considerable pile of bucks were spending on K-12 education is a critical one for the state's budget writers to answer, especially given these new figures from the Census.

Let's hope the discussion this data prompts is productive.
 

Last Thursday the U.S. Department of Commerce's Census Bureau released their 2008 Consolidated Federal Funds Report which details federal spending by state.  Surprisingly, in Maine federal spending only grew 1 percent from Federal Fiscal Year (FFY) 2007 to FFY 2008 and, since FY 2000, spending is up 52.5 percent.  This is below the growth rate nationally at 9.3 percent and 71.3 percent, respectively. (click "continue reading" to view chart).  Why is federal spending slower in Maine than the rest of the country?

There are five categories of federal spending to examine.  First, "retirement and disablity," which is mostly Social Security, increased 4.8 percent between FFY 2007 and FFY 2008--higher than the national average of 4.6 percent.

Second, "other direct payments," which is mostly Medicare and other welfare, increased 15 percent between FFY 2007 and FFY 2008--significantly higher than the national average of 7.9 percent.

Third, "grants to state and local government," which is mostly Medicaid but also transportation spending, increased 4.4 percent between FFY 207 and FFY 2008--below the national average of 16.2 percent.

Fourth, "salaries and wages," which is both military and civilian federal employment, increased 0.4 percent between FFY 207 and FFY 2008--below the national average of 0.6 percent.

So far we have gone through 4 of the 5 categories and all of them collectively are growing far faster than the 1 percent growth in overall federal spending.  I think you know where I'm going with the last category.

The last category is "procurement."  Mainers will not be surprised to note that most federal procurement is done through the Department of Defense.  Not only has Maine historically been home to numerous military bases, but also to significant defense contractors such as Bath Iron Works in Bath or the Portsmouth Naval Shipyard in Kittery.  However, the Brunswick Naval Air Station is slated for closure.

Given the importance of federal defense spending to Maine's economy, it is rather distressing to see that declined by a whopping 31.7 percent from FFY 2007 and FFY 2008.  In dollar terms, procurement spending fell by $525 million to $1.13 billion in FFY 2008 from $1.655 billion. 

However, as shown in the chart, federal procurement has been on a roller-coaster ride as far back as the chart goes.  Yet, this volatility has worsened in the last few years.  Some of this could be attributed to the closure of several bases both in Maine and New Hampshire as well as the pending closure of Brunswick.  Another source of volatility has been the uncertain future of ship production at BIW.  For a brief synopsis behind this saga, see this post at Behind Blue Lines.

Overall, federal spending in Maine is clearly shifting away from real production, such as naval ships, and toward a growing reliance on transfer payment--most notably other direct payments which grew at a blistering 15 percent rate.  Since this is mostly Medicare spending, this reflects both the rapid aging in Maine as well as inflation in the price in healthcare (ironically caused in part by excessive Medicare spending).  These are disturbing signs for the future viability of Maine's economy.

Had the Maine Legislature passed the charter school bill a few weeks ago, we might be watching the development of Maine's first conversion charter school by this point. According to the Bangor Daily News, the town of Greenville, looking for ways to attract young families and economic development to the Moosehead Lake region, are considering converting to a charter school in order to adopt an innovative new approach to teaching and learning:

"We want to do more around the line of environmental education, but because of the constraints of state and federal requirements and mandates, we haven't been able to be as flexible with the program [as] we'd like to be," Union 60 Superintendent Heather Perry said Wednesday.

Perry said school and municipal officials have explored the possibility of the Greenville schools' taking on a quasi-private status to allow that flexibility but found too many barriers. They now have shifted their focus to the possibility of creating the state's first charter school.

"The charter school would allow us to be a little bit more flexible and it would almost operate like an independent school where we could have tuition students from throughout the state and New England," Perry said.

Unfortunately for Greenville, the Maine Legislature defeated the charter school bill, despite the fact that, as the Bangor Daily reported, "the bill had the support of the state Board of Education, the Maine Department of Education, the governor, the House of Representatives and the Maine PTA."

A majority of legislators clearly think that they know better than Greenville residents what is best for Greenville, and until that changes, it is hard to see how the town can move forward with this innovative approach. Still, that towns are thinking in these terms means that they understand how innovative and successful schools can be a tool for economic and community development, even in the most rural parts of Maine. There is hope, therefore, that pressure to pass charter school legislation will continue to mount.

A public forum on charter schools will be held at 6:30 p.m. Wednesday, July 29, in the Greenville High and Middle School library.

 

Will Maine's broader sales tax to new goods and services drive more Mainers to shop in New Hampshire?  Good question.  This news article may provide a clue.  Apparently Massachusetts is not only raising their sales tax to 6.25 percent (a whopping 25 percent increase) but they are also expanding the sales tax base to alcohol.  Now Massachusetts merchants are hanging on for the inevitable rush to the New Hampshire border.  Who else understands the negative effects of cross-border shopping than the very folks who are negatively impacted?  Are policymakers listening?  As I reported previously, Maine businesses feel the negative impact as well.

According to recently released data from the U.S. Department of Commerce's Bureau of Economic Analysis, Maine's private sector share of personal income set an new all-time low of 64.76 percent in the 1st quarter of 2009. (click "continue reading" to view chart)

The primary culprit was the huge jump in personal current transfer receipts (Social Security, Medicare, Medicaid, etc.) of 10.6 percent between the 1st quarter of 2008 and the 1st quarter of 2009.  The total now tops a whopping $10 billion.  State and local government compensation also contributed to the crowding out of the private sector by growing 4.2 percent over the same time-period.

The private sector, by contrast, shrank by 0.9 percent.

While Maine's predicament closely follows the national trajectory, Maine's private sector share is still 7.87 percent lower than the national average (64.76 percent versus 70.3 percent).  Policymakers should be frantically searching for ways to get Maine's private sector share to at least the national average by reforming Medicaid and reducing state worker employment and compensation.

With the defeat of the charter school bill, Maine took a giant step backward in terms of educational innovation, especially with other states stepping up to the plate in response to the Obama administration's call for the lifting of any caps on the number of charter schools.

There could be some innovative changes coming, though, in the way that Maine's teachers and administrators are paid.

Though it seems to have gone entirely unnoticed at the time, LD 1277, "An Act to Encourage Alternative Compensaton Models for Teachers and Administrators," passed both houses of the legislature with a unanimous vote and was signed into law by the governor despite opposition from the public school establishment.

The bill calls on the Maine Department of Education to "review alternative compensation models established in other states," "prepare and submit an application for federal grant funds from the federal Teacher Incentive Fund and any other applicable federal program to develop a state-based alternative compensation grant program," and then "establish an application process whereby school administrative units may apply to participate in the alternative compensation grant program."

What this means is that the state will help interested school districts access federal funding available for the development of alternative teacher compensation systems.  These systems, which we reviewed in not one, but two issue papers last year, use student performance data as one determinant of teacher and administrator pay.

What is the most important sentence in the new law?  This one: "School administrative units must be encouraged to experiment with any number of alternative compensation models."  So rather than a top-down model designed and run from Augusta, Maine's school districts are going to be freed to investigate different teacher pay models and try out different approaches.

Maine as a center for educational experimentation and innovation? Who'd a thunk it?