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By Edward D. Murphy Tuesday, March 6, 2007

This year's "Measures of Growth" report suggests that the state's policy leaders have failed to focus on economic essentials.

The annual report, prepared by the Maine Development Foundation for the Maine Economic Growth Council, waves five red flags and hands out just two gold stars among the 23 indicators of the state's social and economic health.

Even more worrisome is that the red flags -- which indicate a lack of progress or that Maine is falling behind -- can be found on economic basics, such as spending on research and development; improvements in manufacturing production and transportation infrastructure; and the rising cost of health care and state and local taxes.

The pair of gold stars, signifying solid steps toward the council's goals for Maine, were for extending health insurance to more people and helping to make forestlands more sustainable.

In short, Maine made progress on a pair of quality-of-life measures but slid back on some of the things that help pay for a better quality of life.

"In doing such a good job in that, perhaps we haven't been paying enough close attention to less sexy things, the underpinnings of the economy," said Laurie Lachance, president and chief executive officer of the Maine Development Foundation. "Those are tough nuts to crack, and you have to make tough decisions and stick with it.

"We've stalled a bit, we've dropped back a bit," she said.

The numbers were not good even on quite a few of the indicators where the foundation and council decided against pinning red flags. For instance, the state has made considerable strides in the past toward reaching the middle of the pack in per capita income, but Maine's 2005 ranking of 37th among the states was its worst showing in 20 years.

Maine's gross domestic product, a measure of economic output, barely nudged up 1.3 percent in 2005, compared with an increase of 2.3 percent for New England and 3.6 percent for the U.S. as a whole. Employment was flat in 2005, and the number of business starts decreased, while the region experienced an increase in business starts.

Lachance said part of the problem is that Maine was doing well economically in the late 1990s and weathered the 2001 recession better than most states. That might have led people to look at other problems rather than building a more solid economic foundation.

"It's not, 'The sky is falling,' " Lachance said. "However, we cannot lose our focus. We can't make an investment in R&D four years ago and say, 'OK, that's done.' Other states are not only continuing their support (of R&D), they're accelerating their support."

Lachance said the Economic Growth Council's and the Development Foundation's approach is much like the recent Brookings Institution study of the Maine economy, which called for greater government efficiency and investing most of the savings in communities, education and economic development.

Even though the report finds that the state slipped in the last year or two, Lachance said a refocusing could put things back on the right track.

"Even recognizing the fact that there are red flags here, I'm optimistic," she said. "We can get them back in line."