Tuesday, March 11, 2014
FORBES RANKING CHALLENGED
By Meredith Goad firstname.lastname@example.org
Is Maine really the worst place in the country to do business?
Forbes just ranked Maine No. 50 in its annual list of "Best States for Business" for the second year in a row.
Never mind that just last spring, an Ernst & Young report claimed that Maine's tax climate is the best in the nation for new business investment.
And in July, Forbes ranked Portland, Maine's largest city, one of the 15 best places in the country for young professionals, in part because it has the highest number of small businesses per capita of all the cities surveyed.
Garrett Martin, associate director of the Maine Center for Economic Policy in Augusta, says such rankings should be read with "a grain of salt" because what they say depends upon what they measure and who is doing the measuring.
"If you look at the five most widely cited business climate indices, within those five, 34 states can claim to be in the top 10 for their business climate," Martin said. "And in at least one of the rankings, 42 states rank among the bottom 10. It totally depends on how they weight the various factors, what factors they choose."
The Forbes ranking looked at six categories: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. Maine got its highest score in the quality of life category, and its lowest in growth prospects.
George Gervais, commissioner of the state's Department of Community and Economic Development, said that when he talks to businesses considering moving their operations to Maine, "some of the details that this Forbes report brings forth are real issues. They're real issues that we have to deal with."
The Forbes report noted, for example, that Maine's energy costs are 31 percent above the national average.
"Announcing that to the world does not help the state, there's no doubt about that," Gervais said. "But what it does do is strenghten our resolve to maintain the path we're on, because we are tackling the cost of energy. ... Our push for natural gas, that's an immediate fix."
Martin said that while issues such as energy costs "certainly merit our attention," the report didn't emphasize other issues that are perhaps even more important to businesses, such as the rising cost of healthcare.
He prefers the report card approach by organizations such as the Maine Development Foundation, which highlights strengths and weaknesses rather than rankings. The foundation's "Measures of Growth" report addresses specific endeavors the state should be pursuing to improve its economy, such as investing in research and development, improving access to quality education, and bringing down the cost of healthcare, "which, if you talk to any business in this state, is the most pressing issue they face."
"Unfortunately, if we went down the path of saying what can we do to move Maine from 50th to first on the Forbes list, we may find that in doing so we compromise a lot of the things that we value in the state and that make us a unique and desireable place to live, work and play," Martin said. "The Forbes ranking is heavily skewed towards states that have a host of policies that are not necessarily good for workers or for the environment and that, quite frankly, don't reflect the dynamics of the Maine economy."
Gov. Paul LePage issued a written statement Monday that emphasized - and in some cases took credit for - the Forbes rankings for Maine that have improved since last year.
Whether Maine's terrible Forbes finish is real or not, the widespread media coverage that comes along with it doesn't do the state any favors. "It's easy to take shots at people, but you need to be able to back up what you're saying," said W. Godfrey Wood, CEO of the Portland Regional Chamber. "And that sort of press, if it is unwarranted or unproven, certainly does not help us."
Gervais points out that companies looking for a place to set down roots are going to do their due diligence, and make their decisions based on facts, not a single report. But to get those facts, they have to call states for more information.
"What I worry about is that a report like the Forbes report will make some people not make the call," he said, "so it just makes it that much harder and that much more challenging for us to get the word out that states can do business here and we are looking to improve the climate."