Significant financial relief from the federal government is needed to stabilize Maine’s economy through a persistent and severe recession, an economic recovery panel warned Gov. Janet Mills this week.

In a letter to the governor, leaders of the Governor’s Economic Recovery Committee warned that the looming expiration of federal relief programs for businesses and workers “represents an economic cliff for our state, and nation, for which there is no modern precedent or forecast.”

It recommended that her administration rapidly use remaining emergency funds it has on hand to prepare schools to reopen in the fall, provide $300 million in grants to struggling businesses and expand broadband internet infrastructure into areas of the state that lack adequate service.

The recommendations come as Maine’s economic forecasters project high unemployment and falling income during a recovery that could last years.

Mills established the committee to advise her on stabilizing and growing the state’s economy, which has been ravaged by the coronavirus pandemic. Its leaders said emergency federal funding provided thus far to Maine, its businesses and residents represents only a fraction of what’s needed to keep the state economy stable until a post-pandemic recovery can commence.

“Unless further stimulus emerges at the federal level, the effect on our state’s people and businesses will be devastating,” wrote committee co-chairs Laurie Lachance, a former state economist and president of Thomas College, and Josh Broder, CEO of the Tilson technology firm in Portland.

The 39-member committee has been meeting since May and is set to deliver an initial report to the governor next week. But the urgency of the crisis facing the state meant that some recommendations could not wait that long, Lachance and Broder said.

Specifically, communities of color and service industry workers struggling with inequity before the COVID-19 pandemic are at even greater risk and need foremost consideration for public support, the co-chairs said.

“It is urgent that the state of Maine implement vital, equitable measures to support the health, safety and economic security of Maine people and businesses, as soon as possible,” they wrote.

Members of Maine’s congressional delegation responded to the committee’s warning Thursday, with one of the state’s two House Democrats touting the actions her chamber has taken to deliver an additional infusion of financial aid to states.

“More than a month ago, I voted with my U.S. House colleagues to pass the HEROES Act, which would provide more than $5 billion in economic relief to Maine’s cities and towns, and over $100 billion to safely reopen our nation’s schools and public universities,” U.S. Rep. Chellie Pingree said in a prepared statement. “It is reckless that the U.S. Senate has refused to vote on this (COVID-19) relief package. Their inaction will avoidably result in property tax increases and cuts to essential services across our state.”

Republican U.S. Sen. Susan Collins noted that she co-sponsored the bipartisan SMART Act in the Senate, which would provide a total of $500 billion to every state and local government. Maine would receive at least $2 billion through the SMART Act, with more funds available that would be determined directly by revenue shortfalls, she said.

“In addition to its tragic health effects, COVID-19 has devastated communities and slammed Maine’s economy,” Collins said in a prepared statement. “The impact on Maine’s revenues could be among the worst in the nation. Dramatic revenue shortfalls will force state and local governments to either increase taxes or slash or suspend important services in health care, education and transportation construction, which are needed now more than ever in the midst of this crisis.”

U.S. Rep. Jared Golden, Maine’s other House Democrat, agreed with Collins that the SMART Act is the best way to provide needed financial aid to Maine.

“There’s no question that Congress needs to take further action to help workers, small businesses, and state and local governments make it through the COVID-19 recession,” Golden said in a prepared statement. “One of my top priorities is getting more federal resources to the state of Maine and loosening restrictions on the funds our state has already received. The best path forward is the SMART Act, a bipartisan bill which would loosen those restrictions on our state and provide funds directly to Maine towns to make sure things like fire stations, post offices and other essential services don’t go under.”

But U.S. Sen. Angus King, an independent, took aim at the Senate’s Republican leadership for its refusal thus far to take up the HEROES Act, which would provide a total of $3 trillion in aid.

“The House passed the HEROES Act weeks ago, which includes a number of bipartisan priorities that are needed to help our communities weather this pandemic – including funding for state and local governments, who are responding to increased demand for services as their tax revenue is plummeting,” King said in a prepared statement. “I could not disagree more with (Senate) Majority Leader (Mitch McConnell) when he says he doesn’t feel the urgency to take this issue up, since we can use this legislation as a jumping-off point to help Americans through this crisis, and, through debate and amendments on the Senate floor, strengthen the legislation to provide needed relief to the nation.”

Mills urged to release CARES Act funds

The economic recovery committee leaders also urged Gov. Mills to rapidly deploy part of the $1.25 billion in federal assistance granted to the state through the CARES Act in March. Maine already has committed $270 million to refund the trust that pays unemployment benefits, a move the committee endorsed.

But it also suggested allocating $300 million for grants to businesses that have been deeply impacted by the pandemic but are otherwise sustainable when it subsides, a program similar to what New Hampshire has enacted. The program should start in July and disburse funds by the end of August, the committee recommended.

Emergency loans are not the right solution at this time because businesses are wary of taking on debt that could impact existing arrangements with banks and reduce access to other credit, the committee said.

“For many Maine businesses and organizations unable to access current support programs, or whose needs are now greater than what they have received to date, an economic relief program from the state is a matter of survival,” it said.

Allocating significant funds to reopen Maine’s primary schools for in-person instruction this fall is another urgent recommendation from the committee. It said the state should prioritize developing clear, evidence-based reopening guidelines and fund protective equipment and cleaning supplies, more staff and classroom space, additional means of transportation and programs to protect vulnerable teachers and staff.

Reopening primary schools is a precondition to economic stability and “foundational for the safety and well-being of all children in Maine, and an essential measure to allow families and employers to plan for the future,” the committee said.

The Department of Education this week said the cost to reopen Maine schools in the fall would exceed $300 million. The committee asked the department to further explain that projection, noting that a recently released school opening plan for Massachusetts, when applied to Maine, would cost $40.5 million.

It said the state should strengthen support for childcare and publicly endorse clear guidelines for reopening higher education. The committee also reiterated a previous recommendation that Maine quickly allocate funding to expand broadband internet infrastructure in parts of the state that lack adequate service.

The committee issued its recommendations on the same day that Maine’s Consensus Economic Forecasting Commission submitted early projections that recovery may not come until 2022 and effects of the pandemic would linger for years afterward.

Employment will decline from about 636,000 last year to roughly 585,000 in 2021, the commission estimates. By 2022, it should recover to 621,000 before leveling off. Wage and salary income is expected to fall by 5 percent this year before recovering slightly. It projects wage and salary income growth of 2 percent to 3 percent through 2025, well below the 4.6 percent growth last year, the commission projected.

The commission’s estimates are based on early available data and will be revised in an October assessment. There are indications that the U.S. economy hit a trough in April and is on a path to recovery, but the trajectory is unclear because the recession was triggered by deliberate curtailing of economic activity to address a public health crisis, it noted.

“Currently, it is likely that we see a sharp upturn in the immediate future followed by a much slower recovery,” commissioners said. “Increasing rates of infection in turn increase the risk of a ‘W’ or double-dip recession. While states with earlier reopenings have generally seen higher employment growth, they are also starting to see increased numbers of infections, which may result in slower recoveries in the long term.”

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