Brooking Report Ready for Next Step

(from Maine Townsman, December 2006)
By Lee Burnett, Freelance Writer

A daunting list of "must address" issues awaits the 123rd Maine Legislature. Many matters have taken years to rise to the top of the priority list: property tax relief, expanded health insurance coverage, a growing backlog of overdue road projects, the 55-percent goal in education funding, and accumulating shortfalls in Medicaid reimbursements to hospitals.

But the measure creating the biggest buzz in the run-up to next session didn't exist three months ago: the Brookings Report, which carries many implications for Maine towns and cities.

Already, Gov. John Baldacci has made wholesale adoption of the Brookings Report a centerpiece of his legislative agenda for the coming session. He has re-assigned Jack Cashman, formerly his commissioner of the Department of Economic & Community Development (DECD), to be his special assistant in charge of Brookings. Also pushing for quick adoption are Senate President Beth Edmonds and Speaker Glenn Cummings, who have created a special legislative track just for Brookings. A bipartisan group of legislators is eager to assist.

"I've never seen a study or report receive this amount of attention and approval. Ever. Anywhere. Anytime. There's no precedent," says former Maine Governor Angus King.

The fast-track implementation schedule surprised the Maine Municipal Association, which was an active participant in the Brookings project and remains generally supportive of the goals outlined in the report. More on that later.

The Brookings Report is the brainchild of GrowSmart Maine, a three-year-old citizens group formed to combat suburban sprawl, but which quickly morphed into a coalition of groups working to secure Maine's place in the world economy. The group hired the Brookings Institution, one of Washington's most prestigious think tanks, which spent 18 months studying trends and coming up with a renewal strategy. The plan is to build on Maine's reputation as a clean, outdoorsy place, cementing it as a "brand" synonymous with quality places, close communities and innovation. The resulting legislative package addresses many of Maine's thorniest problems all at once. Taken alone, each element would surely generate divisive debate:

• Hike the lodging tax by three cents and dedicate the revenue to a $190 million Quality Places Fund to conserve farm and open land, revitalize downtowns, secure access to threatened fishing hunting and boating spots, and promote tourism

• Cut state spending by $60-$100 million a year by creating an independent government efficiency commission modeled after the federal Base Realignment and Closure Commission.

• Consolidate the administration of Maine's 286 school districts into 64, potentially yielding savings of $25 million a year.

• Use the savings from reduced spending to float a $200 million innovation jobs bond, targeted to not just high tech sectors, but any cluster of businesses organized to promote the whole. Savings would also be plowed into property and income tax reductions, and into financial incentives for regional provision of municipal services.

• Hike the real estate transfer tax to generate $20 million a year to finance stronger anti-sprawl zoning, harmonize Maine's conflicting building and life safety codes, and steer additional investment downtown.

• Allow municipalities to levy local option sales taxes if they agree to relinquish a measure of local control and commit to regional land use planning and service delivery.

Alone, these proposals might die, as similar ones have in the past. But combined, the whole package has taken flight. The glue is the pairing of spending cuts with investments, notes Edmonds. "Here's a way that might bring people together," she said.

Brookings has united not just Democrats and Republicans. Its supporters also include sportsmen, conservationists, downtown advocates, creative economy types, school reform proponents, some developers, and land use planners.

The momentum is prompting legislative leaders to push for adoption of the entire Brookings Plan in the coming year. Empowering a special legislative committee is being considered, but Edmonds is guarding against one that would "steal the thunder of all other legislators who are knowledgeable." To make the process more inclusive, Edmonds would direct committees of jurisdiction to "really weigh in and work the individual pieces" and then have the entire package reassembled by a single committee "but we haven't figured out how to do that yet."

The goal, she said, is to have "as many people pulling in the same direction as you can get."

Brookings phenomenon

The response to the Brookings Report has pleasantly surprised Alan Caron, president and CEO of GrowSmart. "I would say it's probably moving quicker than I would have imagined, but I have held out the possibility that it would electrify people," he said. Caron says the organization is ready to move quickly even though it was initially geared for a 4-5 year implementation schedule."There is a real sense of urgency. This is a moment of opportunity," he said. Caron said he is heartened that there is already significant movement on school administrative consolidation independent of GrowSmart. Both the State Board of Education and the Maine Children's Alliance have issued recent reports calling for consolidated administration, and the retirement of school superintendents in Pownal and Arrowsic are prompting immediate consolidation talks, he said.

Caron said he's not prepared to discuss legislative strategy, but a continued outreach is an important part of the plan.

"It will be very much like the listening sessions we had, which I would call our test run. I can see us doing 30, 40, 50 between now and June on a much bigger scale than we've done before. Hundreds and hundreds of people," he said.

Former Gov. King attributes the enthusiasm for Brookings to many factors. The message is upbeat and well-timed to feed a public dispirited from successive anti-tax referendums in 2004 and 2006, he said. "People were ready for some good news," said King, an advisor to GrowSmart Maine and financial contributor to the Brookings Report. The report has the browsing appeal of a coffee-table book, but is dense with sub-reports, he notes. "The writing is good. The data is good. It's very well-presented." King also credits the political skills of Caron, a one-time high school dropout with a long track record of successful grassroots organizing dating from the turnpike widening referendums in the early 1990s.

King predicts Brookings "will bear fruit" although he cautions, "it's going to be uneven. There seems to be some real movement around the special places bond. That may well go. That's a nice package." Having fought unsuccessfully for school administrative consolidation and curbs on suburban sprawl, King cautions: "The hardest things are the structural changes... And the thing driving that is not the report, but economic necessity. It will take some incentives."

MMA position

"We're generally favorable on the overall themes of Brookings," said Jeff Austin of MMA. In particular, MMA believes municipal officials appreciate the three-dimensional and balanced approach to Maine's challenges outlined in the report. Brookings does not attempt to improve Maine with only spending and tax cuts or with only spending and tax increases, it advocates both. Additionally, he's impressed that Brookings was willing to revisit its preconceptions -- that municipal government was fragmented and inefficient and that Maine faced a generally bleak future -- "by letting the data lead them to places that did not conform to those preconceptions." In the end, Brookings praised the high degree of volunteerism in local governments and became very bullish on Maine's future.

Maine towns and cities would generally benefit from adoption of Brookings' package of bonds. However, that does not translate to automatic support, says Austin.

With respect to borrowing, first on the municipal agenda this legislative session will be the implementation of a debt limitation system, says Austin. Municipal officials believe that reasonable debt limits will have two positive effects. First, it will assure the public that state borrowing is not "out of control"; second, it will establish non-political guidance regarding additional debt capacity. Finally, to the extent new debt is issued, municipalities have historically supported bonds for pressing infrastructure needs such as roads.

It is within the context of debt limits and infrastructure needs that municipal officials will review the Brookings proposals, he says. Austin believes that a research and development bond, or a downtown revitalization bond while appealing to municipal officials cannot be judged in a vacuum, they must be seen along side bonds for roads and water treatment facilities.

Brookings seeks to expand the revenues available for bonding by dedicating new revenue streams to some of their bond packages. That idea is logical in theory, says Austin, but in practice the Legislature has not always been faithful to dedication which has bred cynicism among the general public.

There may be "modest support" for incentives such as a local option sales tax for communities that commit to regionalization, he said. There is also support for greater building and life safety code harmony, although he doubts that municipal building codes have ever been a significant barrier to rehabbing old buildings.

As for Brookings' reframing of economic development strategy away from business parks and tax incentives and toward investments in "quality places," Austin thinks municipal officials will be lukewarm. He does not dispute that open space protection and preservation is important to Maine's economic vitality, its just that municipal officials might have a different set of economic development priorities. For example, is Maine's immediate need for more money for land conservation or the expansion of high speed internet and cell phone services? "Of all the things that are necessary [for economic development], I don't think investment in land conservation is trailing," he said.

Brookings' push for "getting a handle" on overspending and high taxes "in some categories" is all welcome, said Austin. In fact, the priority of municipalities this session will be tightening up the LD 1 spending limit override procedures for all levels of government. (See "Legislative Preview" article in this issue)

MMA's concern is that talk about wholesale adoption of Brookings in 2007 could reignite the anti-tax fervor behind the 2004 and 2006 referendums. When Alan Caron presented the Brookings findings to municipal officials in early October at the MMA convention, says Austin, he indicated that they were looking at a five-year timeframe for implementation. "All of a sudden that five-year time frame has been condensed into the next five months" said Austin.

"We think spending reform should come first. It doesn't mean tax reform isn't important. It doesn't mean investments aren't important." MMA's position is that Brookings should be approached sequentially, rather than as a package. The tax reform and investments discussed in Brookings can not be forgotten or ignored, but "spending limits should come first."

"If you try to do it as a package, it might not survive. The whole thing could go down." If spending reform goes down, MMA believes another TABOR-style referendum in 2008 is possible. "We are very colored by the consequences of Palesky and TABOR," said Austin. "The trend line concerns us," he said.

Cashman appointment

Baldacci's point man on Brookings shares the MMA's concern about igniting a backlash and says the way to guard against it is to address property tax relief first. "I don't think there's a lot of time left," Cashman said. "We are going to fix the property tax first. The Brookings Institution report will come after that."

Cashman said the Brookings report builds on earlier initiatives by King and Baldacci to streamline government to create savings that would be plowed into education, research and development, and business clusters. "That's exactly what we've been saying for the past four years and the King administration before that," he said. "We like most of [Brookings]. We like 90 percent of it and don't ask me which ten percent we don't like because I couldn't name it," he said.

Cashman said his appointment as special assistant reflects an acknowledgement that implementation of Brookings is a huge undertaking that involves "a paradigm shift." He also predicts significant opposition to administrative reform and regionalization.

"When you talk about cutting services, who's being cut is not going to be happy," he said. "Seventy percent of our budget goes to education and social services... If you looking to save money, that's where it's spent."


Brookings skeptics raise two broad concerns. First is skepticism that sufficient efficiency and administrative savings can be found to match the investments sought. Second, that Brookings should not leapfrog other investment priorities - with longer pedigrees and more documented support.

"If I had to guess, the factor that will dominate the legislature is the aftermath, the close call with TABOR. There will be quite a discussion on that. They will hold off on these other expensive ideas until later," predicts John Melrose, former commissioner of transportation and an architect of a proposed road improvement bond. "The threat for Brookings is if it sits on the shelf a while and looses a bit of luster. At that point we'll see how good their ground troops are."

The hospital reimbursement, education funding and a roads bond are all big-ticket items that Melrose predicts the legislature will consider higher priorities than Brookings.

"The legislature will be very reluctant to take something out of order," said Melrose. "If they do, as they've always done, they'll set a [bonding] cap, then divide it up. Certainly, there's a lot of competition," he said.

"To put it in perspective, the legislature authorized $88 million in bonds for all purposes last year. Can you imagine research and development getting $250 million all by itself after that bloody battle? ... It still requires a two-thirds vote. If the Republicans withhold their vote then there's no bond."

Melrose, who is developing with others a road bond in the $100 million range, expressed confidence that a road bond will be popular because it's always among the top vote getters whenever it's put out to referendum.

Some skeptics support many of the Brookings goals.

"It is a huge contribution; it does some good things," said Kit St. John of the Maine Center for Economic Policy. "The hope that it will be enacted all at once doesn't seem like a likely outcome."

St. John said Brookings got the political mood "exactly right."

"The challenge, to some degree, is a psychological challenge," he said. "We've been sold bill of goods that Maine is in terrible shape." He also praises Brookings "hugely successful launch."

But St. John said hundreds of millions of dollars in new spending have already been earmarked for hospital reimbursements and for education spending. "To say we're just going to replace that with a whole new set of priorities -- mind you, I love downtowns -- is extraordinarily naive," he said.

St. John is also skeptical that spending cuts of the magnitude projected will be found. The underlying research by Philip Trostel does not guarantee savings, he notes. Furthermore, the savings from the last consolidation of school administration under the Sinclair Act took five years of incentives, he said.

"It's going to take a lot of patient work by the local districts with state help," he said.

There is very little state spending in the administration of K-12 education, Medicaid (4 percent versus 12-15 percent for private health insurance), or higher education, says St. John. "The report is silent on health care. That is breath-taking. That accounts for a third of state expenditures," said St. John.

"So you get down to a smaller and smaller slice of the budget to come up with the savings," said St. John. "It will be difficult to do it painlessly -- through administration."

Sharing that skepticism is Peter Mills, a Republican state senator from Cornville and candidate for governor in the Republican primary. The savings projected by Brookings are far more difficult to achieve than the investments proposed, he said. The amount of state spending going to disability payments and other forms of income support is "an enormous cross to bear" and it has defied solution [thus far].