Global Matters: Maine needs Cutler's management skills

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Maine voters go to the polls in a little more than a month to cast their ballots for a new governor. With the state and national economies struggling to recover from a brutal recession, the candidates present contrasting approaches to Maine’s economic challenges.

The Baldacci administration managed to pass balanced budgets, but it did so in large part through cuts and consolidations in social services and education once considered unthinkable. The fact that balanced budgets were passed doesn’t mean we’re out of the woods, or that we have achieved some kind of stability or equilibrium.

Indeed, the one constant in the Maine budget process is wide oscillation in state revenue. Just when the sky is falling, we have a multimillion dollar surplus. Just when we dare to exhale, we have to impose furlough days on state employees. Why is this so?

According to the Tax Foundation, a non-partisan tax research group in Washington, D.C., Maine’s tax revenues are comprised of 36.4 percent property tax proceeds, 28.8 percent general and special sales taxes, 26.3 percent individual income taxes, 3.1 percent from corporate income tax and 5.4 percent from licenses and fees.

If we’re unemployed, we’re earning less and probably spending less. Thus, individual income and sales taxes, comprising 55.1 percent of tax revenues, decline.

If at the same time credit is tight, as has been the case during this recession, real estate transfers, construction and corporate transactions decline, also resulting in lower tax receipts.

Yet if, somehow, the “retail economy,” i.e., tourism and personal spending, tick up, the state’s coffers quickly replenish, resulting in occasional surpluses that seem to belie overall weak economic conditions.

Clearly, Maine’s revenue model is a complex organism with many moving parts, influenced by conditions both internal and external, and sustained or weakened by policies that enhance or impede economic activity.

Given this complexity and the obvious need to establish a firmer economic foundation, voters should expect candidates to be focused on solutions that tackle the underlying instability of our revenue model.

Republican candidate Paul LePage seeks to address these challenges by introducing “zero-based budgeting,” in which all state agencies would begin with a zero balance and justify every dollar they seek for their operations. In this way, presumably, less would be spent on recurring or legacy costs. LePage also advocates a flat tax of 5 percent on individuals earning more than $30,000 annually, as well as a 5 percent corporate tax on businesses earning between $30,000 and $500,000.

A LePage administration would be focused on substantial reductions in state revenues and, consequently, spending.

LePage’s approach to state government is to starve the beast.

Democrat Libby Mitchell focuses on government reform and efficiency, suggesting that she will apply principles of lean manufacturing to state government and institute “clawbacks” of unspent money awarded to contractors. She also supports extensive bonding in order to raise revenues necessary to invest, i.e., spend, on critical infrastructure and economic development.

For Mitchell, reining in spending seems less critical than investment in growth. Like LePage, however, Mitchell fails to disclose the impact of these “reform” measures, nor how Maine will repay its higher bond obligations. Presumably we can grow our way out of our predicament.

Mitchell’s approach: tweak the beast.

Independent Eliot Cutler believes that the costs of energy, government and health care in Maine are too high. He proposes specific measures to reduce these costs, including a comprehensive review of agency regulations, establishment of a public power authority and implementation of wellness and primary care access programs. Cutler’s website reveals detailed analyses of the issues and he proposes reasoned structural approaches that go far beyond short-term pseudo-fixes.

Cutler’s approach: manage the beast.

Governing is a serious business and never more so than now. LePage, Mitchell and Cutler have all served at various levels of government. LePage and Cutler cite private sector experience as well. Voters should therefore expect reasoned, specific, lucid and verifiable proposals that reflect their understanding of complex organizations.

“Starve the beast” may sound appealing, but an organism seldom functions well after being choked.

“Tweak the beast” may sound benign, but it will not encourage fundamental change and may well lead to inertia and bloat.

“Manage the beast” is the only approach that incorporates reasoned and data-driven decisions. Alone among the leading candidates, Cutler has experience actually managing complex budgets, weighing policies against costs and dealing with both the financial and political consequences of budget decisions.

Voters need to get serious about Maine’s economic condition. Maine needs to get its house in order. Eliot Cutler offers Maine and Maine people the best path to economic stability.

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Perry B. Newman is a South Portland resident and president of Atlantica Group, an international business consulting firm based in Portland, with clients in North America, Israel and Europe.

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