What’s Ahead for Maine in Next 20 Years?

John Davulis, Chief EconomistCentral Maine Power Company

Long Range Planning SeminarMaine Dept. of Transportation

August 8, 2005

2

Long-range planning has to be different

• Short-term forecasts are dominated by events – oil prices

– base closings

– housing bubble

• In the long run, the structure of the system will change– aging population

– climate change

– technological advances

3

Credibility is important

• There is another way you can tell you’re a Republican. You have faith in free enterprise, faith in the resourcefulness of the American people, and faith in the U.S. economy. To those critics who are so pessimistic about our economy, I say “Don’t be economic girlie men!”

– Gov. Arnold Schwarzenegger, Republican Natl. Convention, August 31, 2004

4

When, where & how big?

• Unfortunately economic models aren’t very good at telling us about the distant future

• As Patrick Henry aptly observed in 1775: “I know of no way of judging

the future but by the past.”

• Today’s economic models are offer – a reasonable extrapolation of

the past that is tempered by likely structural changes in the local and the national economy

– nothing is predetermined

5

Overview of Presentation

• Global Insight’s economic forecast for Maine & its counties– no BRAC impacts are

incorporated

– slow employment growth• continuing loss of

manufacturing jobs

– slower population growth

– aging population

6

Growth in Total Nonfarm Employment (000s), June 2004 to 2005

June Percent June Job Percent2004 of US 2005p Growth of US Rank

California......... 14,479.0 11.04% 14,752.5 273.5 14.07% 1Florida........... 7,503.2 5.72% 7,731.3 228.1 11.73% 2Texas.............. 9,474.9 7.23% 9,590.4 115.5 5.94% 3Arizona............ 2,365.6 1.80% 2,463.2 97.6 5.02% 4New York........... 8,450.5 6.45% 8,525.1 74.6 3.84% 5

Massachusetts...... 3,182.0 2.43% 3,205.8 23.8 1.22% 25Connecticut........ 1,648.6 1.26% 1,670.8 22.2 1.14% 27New Hampshire...... 626.1 0.48% 637.9 11.8 0.61% 37Rhode Island....... 488.4 0.37% 495.0 6.6 0.34% 44

Vermont............ 302.7 0.23% 308.5 5.8 0.30% 47North Dakota....... 337.5 0.26% 342.6 5.1 0.26% 48Maine.............. 614.0 0.47% 618.4 4.4 0.23% 49South Carolina..... 1,827.7 1.39% 1,814.0 -13.7 -0.70% 50Michigan........... 4,387.6 3.35% 4,373.9 -13.7 -0.70% 51

Total U.S………… 131,110.3 100.00% 133,054.5 1,944.2 100.00%

7

Economic/Demographic Outlook for Maine, 2005-2025

0.6%0.7%

-0.8%

0.2%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Total Employment Nonmfg. Empl. Manuf. Empl. Population

1990-2005 2005-2025

8

Annual % Growth in Total Employment, 2005-2025

0.6%

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2%

Piscataquis

Sagadahoc

Oxford

Franklin

Kennebec

Aroostook

Washington

Penobscot

Waldo

Androscoggin

Maine

York

Knox

Somerset

Cumberland

Hancock

Lincoln

9

Percent of Employment in High Tech Industries, 2004

Mass.10.7%

U.S.7.4%

Maine3.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Mic

higa

n

Was

hing

ton

DC

Con

nect

icut

Mar

ylan

d

Cal

iforn

ia

Was

hing

ton

Col

orad

o

Illin

ois

New

Ham

pshi

re

Tota

l U.S

.

Min

neso

ta

New

Mex

ico

New

Yor

k

Flo

rida

Kan

sas

Nor

th C

arol

ina

Uta

h

Ver

mon

t

Neb

rask

a

Okl

ahom

a

Ark

ansa

s

Loui

sian

a

Mis

siss

ippi

Nor

th D

akot

a

Ala

ska

Wyo

min

g

10

Manufacturing Employment (thous.)

40

50

60

70

80

90

100

1990 1995 2000 2005 2010 2015 2020 2025

11

Annual % Growth in Manufacturing Employment, 2005-2025

-0.8%

-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0%

Franklin

Kennebec

Aroostook

Penobscot

Piscataquis

Sagadahoc

Oxford

Washington

Androscoggin

Knox

Waldo

Maine

Cumberland

York

Hancock

Somerset

Lincoln

12

Population by Age (% of Total)

10%

15%

20%

25%

30%

35%

40%

1990 1995 2000 2005 2010 2015 2020 2025

Aged 65 and Older

Aged 0 to 24

13

Annual % Growth in Population, 2005-2025

0.2%

-0.1% 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6%

Piscataquis

Kennebec

Sagadahoc

Franklin

Penobscot

Oxford

Aroostook

Washington

Androscoggin

Maine

York

Knox

Cumberland

Waldo

Somerset

Hancock

Lincoln

14

Annual % Growth in Nonmanufacturing Employment, 2005-2025

0.7%

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2%

Piscataquis

Kennebec

Franklin

Oxford

Aroostook

Penobscot

Washington

Sagadahoc

Waldo

Maine

York

Androscoggin

Knox

Cumberland

Somerset

Hancock

Lincoln

15

Two Possible Futures

The Blonde in the Thunderbird -- we can try to revel in our past “glory”

The Edukators -- we can rearrange the furniture

16

Bruce Mau: Massive Change

17

My Grandfather’s Axe

• This is my grandfather’s axe. My father changed the blade, and I have changed the handle.

Old “Polish” Saying

The Economist

June 23, 2005

18

Is This My Grandfather’s Maine?

• What original or early material is essential to the integrity and significance of Maine -- two decades ahead?

• What design elements do we want to safeguard and maintain?