One of the state’s best-known economists has forecasted that Maine’s economy will sustain no growth over the next six months. It will, however, start to improve again in the early summer.
Last Friday’s USM Corporate Partners monthly meeting at Portland’s Woodbury Campus Center drew an unusually large crowd.
This was most likely because of the morning’s guest speaker, Charlie Colgan, one of the state’s best-known economists and a professor in the Muskie School.
Each year Colgan puts together an economic forecast for the year, and last Friday he unveiled his forecast for 2002. Colgan predicted that over the next six months the economy would not fall any further. The recession, which started a few months before Sept. 11, should end in the early summer as the market will finally start to rise again.
Colgan admitted that though the state has fallen into recession, Maine will not see the downturn like the country did nearly a decade ago.
“This is a pot hole. It hurts but we’ll get out of it,” he said. “It won’t be a repeat of the early nineties.”
He said the events of Sept. 11 didn’t have the same devastating effects on the state economy as on the national economy. Colgan said if the terrorist attacks had happened in July there would have been a much more serious impact on Maine’s economy.
“The fact that it only wiped out the leaf peepers was good for Maine,” said Colgan. “This is the first time since I’ve been here that Maine is better off than the rest of the country.”
The recession, though it has been comparatively good to Maine, has still created a nearly $250 million shortfall in the state’s budget.
“It certainly will cause a trickle down effect,” said Bob Caswell, executive director of Media and Community Relations for USM. “That could have an impact on the University.”
Last year, the state’s budget included a 2.5 percent increase in funds to the University of Maine System. But late last semester, the Governor ordered UMS to give back 2 percent of the money it was given. For USM, that order initiated a hiring freeze. The University has until July to make up more than $700,000.
Even with the large shortfall, the Governor has vowed to protect next year’s expected 2.5 percent increase and plans to include it as part of next year’s budget, said Caswell.
However, some University officials believe more cuts will come.
“The Governor’s protected the 2.5 percent,” said Colgan. “But the Legislature is yet to approve it.”
But many are uncertain at just how the recession will affect the University of Maine System and the University of Southern Maine. President Pattenaude expects that some people may choose to go back to school when work is hard to find, but admitted that many families in harder economic times may not be able to do that.
“Some families might not send their kids to Tufts,” said Pattenaude. “They might come to USM and save money.”
According to Pattenaude, though, Colgan’s prediction of growth in six months falls near the start of the fiscal year. This could perhaps be a good start to next year.
“Our economy starts on July 1,” said Pattenaude.
At the same time that the University System is weary of budget shortfalls, the System is expecting major health care increases. It will sign a new contract this July. The new contract will result in an estimated increase of $1.5 million dollars for the University of Southern Maine alone.
“Whether we stay with Anthem or go with someone else we will face an increase,” said Bob Caswell.
Staff writer Tyler Stanley can be contacted at: [email protected]