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From Site Selection magazine, January 2013

Seeking Alignment

Does Gov. Paul LePage row with the tide or against it?

First lit in January 1791 with 16 whale oil lamps, the Portland Head Light in Cape Elizabeth was automated in 1989.
Photo courtesy of Maine Office of Tourism


aine is a bundle of contradiction, wrapped snugly in traditional New England eccentricity. Where else would legalize fireworks (in July 2012) just three months after being declared the most peaceful state in the union by the annual United States Peace Index?

It's a state with more than its share per capita of solitary artists and visionary entrepreneurs, tucked like crustaceans in the rocky coastline's scenic crevices. It's also a state with a labor legacy, courtesy of its shipbuilding and forest products past.

Enter Paul LePage, a native Mainer who grew up among 17 brothers and sisters, spoke French as his primary language, and said in November he doesn't care about re-election. That was right after the rough-and-tumble governor, trying to make a point about the need for public school improvement, told an audience that children should go to a private school if they wanted a good education. And it was just a few weeks before the former mayor of the college town of Waterville publicly accused the U.S. Dept. of Labor of engaging in subterfuge to torpedo his plans to reform his state's work-force development efforts.

It's the second conflict with the Dept. of Labor he's had since coming into office in January 2011: The first was when he moved to have a mural depicting labor milestones removed from a Maine Dept. of Labor conference room, because it offended business visitors' sensibilities, thereby inspiring U.S. Secretary of Labor Hilda Solis to ask for the federal money back that had helped fund the mural's creation.

But behind the sideshow there's always a main event.

Julie Rabinowitz, director of communication for the Maine Dept. of Labor, says a recent appeals court decision affirmed the governor's right to remove the controversial labor mural, and the state is still deciding where it will finally be located. As for the more center-stage topic of work-force development, the dust-up with DOL is simply a reflection of Gov. LePage's efforts to clean up a local area work-force investment board system that has a history of "at best, wasteful spending, and in several cases actual corruption and fraud," with two of the four Local Workforce Investment Boards placed in "high-risk grantee" status, requiring the federal government to qualify them more rigorously before dispensing funds.

In other words, in a twist on the old standby jibe about the federal government's arrival on the scene, LePage's administration is here to help.

Rabinowitz says the amount of work-force investment board money going directly into training has been 20 percent, a proportion LePage, according to a summary report, found "shocking," and wants to increase to at least 50 percent for in-demand jobs, while also doubling the local work-force regions from four to eight in order to more accurately reflect specific regions' training needs.

Shake-Out from the Shake-Up

LePage is fully engaging the state's business community in his business climate reforms and initiatives, via a Maine Business Survey launched last July. George Gervais, commissioner of the Maine Department of Economic and Community Development, says the survey results thus far, incorporating responses from hundreds of companies, show that "53 percent of Maine businesses are either expanding or planning to do so within two years … One in three Maine businesses say it is very difficult to find the skilled labor necessary to fill the jobs they currently have open or plan to create. One in three Maine businesses also report problems trying to get access to much needed capital at the most crucial time."

All the more reason why LePage's work-force training and public education reform efforts bear watching. Rabinowitz says his plan, which already has gained legislative approval for more state oversight of policy and of local boards, eliminates the administrative layer, "but actually increases the training." She says it's understandable that local work-force investment board administrators feel threatened by the plan, "but the people hurting are the people who aren't receiving training."

In calling attention to a September 2012 report from Georgetown University that found that 29 million well-paying middle-class jobs go to workers without bachelor's degrees, LePage said, "I hear from Maine businesses all the time that they have jobs for skilled workers, but they can't find the people to fill the jobs. "We're an administration that is changing the culture in education so we better prepare them for the jobs of today. No child deserves to slip through the cracks because of a lack of options. We need to do more to ensure that career and technical education is seen as a valid, mainstream path; it's another choice for students, and must be a bigger part of Maine's academic future."

Asked whether the governor's style might be concerning to some who might worry about maintaining longstanding ties with federal agencies, Rabinowitz says, "I think it's really a sign of progress, because the governor is willing to shake up the status quo and not be satisfied with minor changes. He has a vision for the state, and is doing everything he can to move the state in that direction." That includes examining various ways of reducing the cost of doing business in the state, beginning with the cost of power.

"Reducing energy prices in the state is a priority for the administration," says Gervais. "More needs to be done to address the high energy costs in Maine. Our tax rates must be fair and equitable. We need to make strategic investments in infrastructure. It's all about being competitive, and we must address these issues head on."

Some have already been addressed. The Maine Fiber Company successfully installed a 1,100-mile, high-capacity fiber optic cable network, known as the Three Ring Binder Project, allowing high-speed Internet service to reach businesses, homes, schools and hospitals in more than 100 communities.

But again, the contrasts come to the fore. In December, Forbes' annual "Best States for Business" list ranked Maine, home to the nation's highest median age, dead last. But when the Tax Foundation released its 2013 State Business Tax Climate Index in October, Maine saw the greatest improvement in its tax ranking, moving from 37th to 30th on the list. LePage credited his administration's ongoing fiscal and tax reforms. Also in October, LePage earned the second-highest grade in the Cato Institute's "Fiscal Policy Report Card on America's Governors."

A footnote in the Cato report card noted that credit was given for "proposed" policies, not just those enacted by working with state legislators. But the business climate progress has been real.

LePage in 2011 signed into law a major income tax cut that reduced the top personal income tax rate from 8.5 to 7.95 percent, simplified the tax brackets, and eliminated taxes for 70,000 low-income households. The package also included some business tax cuts. In 2012 he signed legislation to reduce the top personal income tax rate to 4 percent over time if there are sufficient budget surpluses. His ultimate goal is to phase out the Maine personal income tax completely, and cut the state's corporate tax rate from 8 percent to 4 percent.

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