2005 MERI SENIOR MANAGEMENT SURVEY

May 25, 2005

                 

Executive Summary

Market Research Insight assisted Maine Economic Research Institute with a survey of Maine’s senior business officials.  The Senior Management Survey had 531 business leader participants providing a sampling error factor of below 4.5% at a .95 level of confidence. MRI completed earlier surveys of Maine business leaders in 1999 and 2002.  Some comparisons between the current and earlier surveys are made in the report.  Dr. Verne Kennedy, MRI President and Senior Analyst, served as Project Director.  Deborah Amick, MRI Business Analyst, assisted with data analysis and report preparation.

Survey participants had considerable diversity in business industry classification.  Although 23% were in manufacturing, 27 other business classifications were included.  The study also provides a wide representation of business size as determined by number of employees.

NUMBER OF MAINE EMPLOYEES
	2005
5 Employees or Less	14%
6 - 20 Employees	28
21 - 50 Employees	25
51 - 99 Employees	13
100 - 1,000 Employees	19
Over 1,000 Employees	1

The average business in Maine has a mean of 85.13 employees with a median of 26 employees.

The organization of participating businesses was primarily corporate, 83%, with 6% sole proprietor, 6% not for profit, 4% partnership, and 2% other structures.  Among participating companies, 24% also have operations in other states down from 34% in 2002.  Cumberland, Penobscot, and York Counties were most represented and together made up over 50% of all respondents.  Actual survey participants were 60% owners, 26% CEOs, 10% senior management officials, and 4% other categories.

Fifty-nine percent of respondents said based on their experience, the average Maine-based business makes under 10% after tax profit.  In comparison, the average individual holds the opinion that businesses in Maine make closer to 27% profit.  A reality gap exists between actual and perceived profits by most people living in Maine as well as in many other states. 

Senior management officials are extremely pessimistic about the business climate in Maine with 94% saying they consider the overall business climate in Maine poorer than in other states and Canada, compared to 88% in the 2002 survey.  Business leaders in Maine are more pessimistic than business leaders in any other state in which MRI has conducted similar surveys. In addition, 90% of Maine business leaders hold the opinion that the perception of Maine’s business climate as held by business executives in other states is negative, up from 85% in 2002.  Pessimism about Maine’s economy is greater today than when surveyed in 2002. 

The perception of Maine business taxes changed between 2002 and 2005 with business executives responding 90% too high in 2002 and 95% too high in 2005.  Respondents also said that personal taxes have gone up as well.  Senior management officials consider Maine’s tax burden much higher for both corporate and personal taxes than in other states.  In fact, 95% said that personal taxes were too high and 95% said corporate taxes were too high.  Among respondents, 82% said their companies would be more likely to expand or invest new capital in Maine if the overall tax burden for businesses and individuals were lowered.

Those saying that skilled labor availability in Maine was poorer than other states decreased from 64% to 55%. Overall, 8% said skilled labor availability was better and 55% poorer than in other states.

Several questions asked Maine business leaders to compare taxes, availability of skilled labor, and quality of that labor with other states and Canada.  The following graph summarizes results depicting the percent of business leaders saying that Maine is better or poorer.

 

 

Maine business leaders comparing essential business characteristics in their state with other states say that business taxes are much higher in Maine, the availability of quality skilled labor much lower, but that the labor ethic of Maine workers is better.  Maine’s business leaders point to a business climate which is no longer competitive with other states and Canada.

The quality of life, Maine work ethic, and access to raw materials were key factors attracting businesses to Maine.  Senior management officials were asked if factors attracting their company to Maine have changed.  They say the Maine quality of life is now slightly worse, access to raw materials slightly worse, the Maine work ethic and skill level somewhat worse, but general access to labor is much worse.

The survey also examined Maine’s regulatory environment.  The administration of state and local regulations in Maine was considered 74% too strict and 2% too lenient.  Although business people generally complain about regulations, no state surveyed by MRI has responded with 74% of business leaders saying too strict.  Senior management officials also say that cost for Worker’s Compensation is higher in other states, and 58% say that these costs are increasing. 

The survey tested support for four new issues in 2005.  Strongest support existed for greater competition among healthcare insurance providers, with 89% support.  Seventy-two percent of senior management officials support locating a liquid natural gas (LNG) on Maine’s coast.  Much lower support existed for the other two healthcare issues.  Forty-nine percent were against the Maine Dirigo Healthcare Program, and respondents were nearly evenly split in their support of the state policies creating a healthcare risk pool, with 28% supporting and 29% against.

When it comes to encouraging business expansion in Maine, 89% of respondents say that Maine should offer incentives to encourage existing business and industry to expand and incentives for new companies to locate in the state.  In addition, 91% say Maine should make its business tax incentive programs competitive with other states.  Seventy-six percent of respondents prefer a broad-based approach to state economic development that helps all businesses.

Among respondents, 82% said their companies would be more likely to expand or invest new capital in Maine if the overall tax burden for businesses and individuals were lowered.  Eighty-five percent of Senior Management officials disagree that Maine’s economic policies provide competitive advantages to Maine businesses relative to other states.  In addition, 93% of senior management officials said the overall cost of doing business in Maine is higher than in other states, and 60% said much more expensive.

The survey examined influences on Maine’s economy.  Senior management officials were asked if each of the following was a positive or a negative factor on Maine’s economic and business growth.  The survey used a five-point scale ranging from five for very positive to one for very negative.  The following graph depicts results.  The higher the score, the more positive the factor.

The following graph depicts the top factors receiving most positive influence responses for helping Maine’s economy. 

 

Top positive influences were vocational, technical, and private colleges, the banking system, and the State University system.

The next graph depicts the top negative response factors influencing Maine’s economy.

Top negative influences continue to be state and local taxes, health insurance and healthcare costs, and energy costs.

How do business leaders determine which legislative candidates to support based upon specific issues?  Using a ten-point scale, business leaders rated the following issues.  The higher the rating, the more important the issue when it comes to identifying pro-business candidates for the State Legislature.

 

Maine business leaders are very aware of negative influences on their economy.  When it comes to support for legislative candidates, business leaders want candidates who will work to reverse the negative consequences of these factors.

The most important issues determining business candidate support were state and local tax reform, healthcare cost containment, improved management of state government, state partnerships for business development and attraction, and tort reform and related insurance reform. 

Senior management officials still consider business and industry in Maine more fragmented than united with 74% responding fragmented and 25% united.  In addition, 75% say that Maine legislators are unresponsive and only 17% responsive to the needs of business people.  Sixty-seven percent of business leaders think the current administration is unresponsive and 18% said responsive.  Laws and programs affecting businesses were labeled 83% inconsistent and only 18% consistent.  State agencies were considered 58% unresponsive and 20% responsive.  Key business leaders believe that Maine state legislators are not at all knowledgeable of business needs when it comes to state policies.

When compared to 2002 survey results, Maine business leaders consider the business and industry community more fragmented today, believe that legislators are less responsive to business needs, say that laws and programs effecting businesses are more inconsistent today than before, and say that state agencies are less responsive in 2005.

Business leaders say that the top remedial actions for improving public education in Maine are improved basic skills, improved funding, less administration, increased teacher skills, accountability, merit pay, teacher quality, teacher testing, maintaining standards; and improved vocational and technical schools.

When it comes to priorities for strengthening Maine’s economy, tax relief, less government, easing regulations and controlling healthcare costs were most frequently mentioned.  The state’s tax system, lack of political leadership, and government regulations and mandates were considered the main roadblocks to improving Maine’s business environment.

Overall, 531 Maine business leaders participating in the Senior Management Survey are very pessimistic about the state’s economy and potential for future growth.  When compared to 2002 survey results, business leaders are more pessimistic today on almost every issue tested.   More importantly, Maine business leader responses paint a more negative picture of the business economy in Maine than MRI has seen in any state in which the research firm has worked. Business executives say that Maine is at a strong disadvantage compared to other states and Canada on almost all issues important for a strong economy.  High taxes, healthcare costs, rapidly increasing worker’s compensation costs, high cost of insurance, energy costs, state regulatory policies and agencies, transportation costs, and a legislature that lacks understanding of critical business needs and is unresponsive when business leaders ask for help were seen as key factors hurting the state’s economy and preventing economic growth.