State Economist On The Challenges Maine Faces During Coronavirus Crisis

May 6, 2020

For more than a month, Maine has confronted the coronavirus, which is affecting all Maine people. Mainers living through this coronavirus economic slowdown are getting a glimpse of what happened in the Great Depression. Unemployment is soaring. Many are having trouble paying bills. Food pantries are seeing spikes in visits.

Amanda Rector, the Maine state economist, shared some insight into all of this with Morning Edition host Irwin Gratz.

This interview has been edited for clarity.

Gratz: Have you ever come across economic conditions like this in Maine before?

Rector: This really is a very unprecedented event. There’s been more discussion about the 1918 pandemic. And you think back to that, the economy was vastly different at that point in time. That’s made it very challenging to try to do any sort of analysis or forecasting in this particular environment.

Gratz: Economically, the state government was in pretty good shape going into this, was it not?

Rector: We were in good shape both in terms of having a good budget stabilization fund for state government to help fill some of the revenue hole that we know is coming. And in terms of revenues continuing to come in very strongly right up until the time when effects of this hit. That was a good jumping off point, I think, where we were at at the end of 2019 and very beginning of 2020. But we’re at the stage now where we are trying to catch up with what has been deteriorating over the recent weeks. A lot of the data we rely on has a big lag. And so we’re just now starting to get some of the first pieces of data that tell us what current conditions are like. We seem to be hopefully in pretty good shape for this fiscal year. A lot of the challenge is going to be how long does this last? What does the recovery look like and what does the next fiscal year look like?

Gratz: I know the governor has asked the revenue forecasting panels to reconvene for an update. What are the kinds of state revenues that are at risk at the moment?

Rector: Two of the biggest pieces are the income tax revenue lines. Certainly we rely very much on withholding revenues. That’s essentially the money that if you’re working, that gets saved by the employer and paid directly to the state for your income tax. And then also sales tax, particularly some of the large things like automobile sales, we rely on some of those big purchases that people maybe have been reluctant to make or have been physically unable to make. Of course, another concern is related to highway fund revenue where people obviously haven’t been driving. We saw traffic count data plummet. And so we use that as a proxy for sort of some of the estimations of what economic impacts might be. And so you’re not driving, we’re not collecting gas tax revenue.

Gratz: I mentioned the Great Depression, but this is fundamentally different in that it’s a severe economic slowdown by choice. Is that going to matter to our ability to recover from this?

Rector: The fact of the matter is, when we were first starting to see the effects, I had a lot of people asking about the economic impacts. And I said until we have a handle on the public health crisis, there’s no sense even really thinking about the scope of the economic crisis because we have to deal with the public health crisis first.

Gratz: And then, of course, the other X-factor in all of this is going to be how comfortable people are going back to what they were doing before. Whether it’s traveling, eating in a restaurant, shopping at a department store, all that stuff.

Rector: The economy at large is based on the decisions that people are making because of how they’re feeling. And so if you’re feeling uncertain, you’re less likely to go out and make investments both on the consumer side and then on the business investment side as well. And so if you’re not sure that you’re physically going to be safe when you’re out and about, you’re much less likely to engage in some of those activities. So one of the things that’s really important to the economic recovery is making sure that people do feel safe and comfortable when they’re out and about.

Gratz: Obviously, we hear a lot of stories about the people, and there are many of them, who have either been furloughed or laid off at this point and so have lost their jobs. Is Congress providing enough support for Mainers who are out of work or at this point for the state considering what it may need?

Rector: We have $1.25 billion that have arrived from the federal government sitting in an account, but we don’t yet have enough guidance on how that can be spent. And more importantly, can that be used to backfill revenues? At this point the federal government has said, no, it can’t be used to backfill revenues. Well, that’s going to be a really important thing for the state going forward, is the ability to fill some of that hole so that we can continue to provide the services that are needed and are in greater demand at this point in time. Certainly we have that budget stabilization fund, so that provides us some cushion and we’re in much better shape economically speaking as we went into this. So that helps as well. But having the flexibility to use that to backfill some of those revenues and fill some of that hole is going to be really important to the state going forward. Hopefully that will be cleared up in the coming weeks.

Gratz: Do you have any advice for individuals as they navigate this economic time?

Rector: I think as much as possible we really need to just be supportive of each other. We’re all in this together. I look at the things that a lot of companies and people are doing around the state that are really innovative. I look at all of the terrible economic news, but then hey, you know what? There are companies that are changing their lines so that they can produce PPE and bringing people back in to work on that. And neighbors who are helping out with other neighbors and bringing school lunch deliveries, the kids who are at home. There are a lot of things that people are doing that will make us stronger as a state in the long run.

This interview is part of Maine Public's Deep Dive: Coronavirus. For more, visit mainepublic.org/coronavirus.