May 25, 2018
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Understanding what Forbes said about Maine

Forbes once again has posted a “Businesses, Do Not Enter” sign across Maine’s border. For the second consecutive year, the state was ranked 50th in the magazine’s analysis of the best places to operate a business.

The details of the ranking should help guide Gov. Paul LePage and the Republican-controlled Legislature in their effort to bring sustainable prosperity to Maine. But it would be a mistake to take the headline as an endorsement of anything that might be listed on a pro-business agenda. Further analysis of what Forbes is saying — and what it isn’t saying — with this ranking is very important follow-through work.

Forbes ranked the 50 states on six categories it deems critical for businesses to thrive: business costs, labor supply, regulatory environment, economic climate, growth prospects and quality of life. “We factor in 37 points of data,” the magazine states, with business costs — labor, energy and taxes — weighted most heavily.

On the business cost factor, Maine ranked 44th among the states. Clearly, tax rates must be addressed. Reducing state spending must not be the only focus; tax reform that cuts the rates small businesses pay as sole proprietors as well as cutting corporate rates, while not shifting the burden to the middle class, is vital.

Energy costs remain a regional challenge, both because Maine is a cold-weather state — not much that can be done about that — and because it does not have good access to fuels. State government should keep focusing on reducing costs, but the most cost-effective way to cut those costs is to support energy efficiency efforts. The cheapest gallon of oil and kilowatt hour of electricity are those that are not purchased at all.

In the category of labor supply, Maine ranked 28th among the states. Though our median age is in the mid-40s — not great for startups looking for young employees — Mainers have a reputation for a strong work ethic and many are underemployed. But the far-flung nature of our population is a hindrance.

The LePage administration will seize on the state’s ranking of 45th for regulatory environment. But rather than put the regulation manuals through the shredder, the administration would do better to focus on taking the slack out of the quest for permitting.

Maine’s prospects for growth, according to Forbes, are dismal, earning the state a 50th ranking. Some of that bleak outlook is tied to our flat population growth, with increases of fewer than 1,000 in recent years. The population challenge is rarely discussed in Augusta, but it is cursing Maine’s future. Forbes gave high rankings to many western states in part because of their steady population growth.

Lastly, Maine’s rank of 17 for quality of life must not be downplayed. That somewhat subjective assessment is very real when it comes to business relocation and retention. Interestingly, in July, the magazine listed Portland as one of the 15 best cities for young adults. It noted that Portland — which offers many “quality-of-life” amenities like arts, entertainment and access to outdoor recreation — “has the highest number of small businesses per capita [and] a relatively high proportion of large businesses and a low unemployment rate.”

Portland’s population density, quality of life and educated labor pool may be difficult to replicate elsewhere, but it can be nurtured and grown. So maybe the sign on Maine’s border should read, “Welcome to Portland, Home of Maine.”

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