Unpacking Maine’s Horrible Business Ranking

Yesterday, Forbes released its annual list of “The Best States for Business“, and Maine had the unfortunate honor of coming in dead last. Again.

Clearly they haven’t seen the governor’s sign.

Governor LePage and legislative Republicans have been in power for roughly a year, and it is quite unrealistic to expect Maine to be completely changed in such a short time.  Still, they can’t have liked the news.

But it does beg the question: Just what exactly makes Maine such a terrible place for business, according to Forbes?  Can we do anything about it?

The short answer to that last question is yes, but our ability to dramatically rise quickly is very limited.  Here’s why.

Forbes uses the following measuring sticks to do their rankings:  cost of doing business, labor supply, regulatory environment, economic climate, growth prospects and quality of life.

Maine’s rankings in each?  In order:  44, 28, 45, 42, 50, 17.

The cost of doing business ranking is essentially labor costs, energy costs and tax burden.  Labor supply is a mix of educational attainment, population growth and union membership.  Regulatory environment is tax incentives, economic development initiatives, tort liability and regulatory burdens.  Economic climate is the growth of jobs and the economy over the last five years.  Growth prospects is the same, only projected into the future five years by Moody’s.  Quality of life is a measure of poverty, crime, etc.

Given those criteria, Maine is going to be languishing toward the bottom of this list for quite some time.  Its strength is the labor supply and quality of life, but everything else is horrendous.

The single biggest change Maine could make to improve its ranking would be to address its regulatory environment, which comes in at an embarrassingly low 45th out of 50.  Unlike current economic climate and future growth prospects – both of which are likely to remain in the gutter – the regulatory environment can be changed, and changed quickly.  All that is required is political will among lawmakers.

But as for the rest, the cost of doing business is going to be held hostage by energy costs and taxes for the foreseeable future.  No matter how much Governor LePage and legislative Republicans would like to hack up the tax code, in the current economic environment, they can only make small changes at the margins.

Even if the government were to take radical steps to address energy costs, it will take some time to see results.

To his credit, I have heard from multiple sources at the state house that the governor is obsessed with what he calls “the three Es” – education, energy, and economy – and wants to make the upcoming legislative session focused around them.

But, I fear that no matter how much changes, it will take a great deal of time before you see Maine move very far up this kind of list.

Matthew Gagnon

About Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. Prior to Maine Heritage, he served as a senior strategist for the Republican Governors Association in Washington, D.C. Originally from Hampden, he has been involved with Maine politics for more than a decade.