LEAVE NO MAINER BEHIND:

THE MAINE HUMAN CAPITAL INVESTMENT FUND

Reforming, Modernizing, and Investing to Connect Maine People with Good Jobs

MAY 3, 2018

with John Dorrer,

former Director of Maine’s Center for Workforce Research and Information

Authorized by the candidate, paid for by Anna Turcotte, Treasurer.

CONTENTS
I. Introduction: Maine cannot afford to waste human talent.

II. Where we are today: Maine’s economy is lagging on job, income and economic growth

III. Maine Human Capital Investment Fund - Summary

IV. Program context

V. How it would work

VI. Four examples

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 INTRODUCTION

For Maine to succeed and reach its incredible potential over the coming years, it is time for us to lead regionally and
nationally and build an economy based on a value I lived by as a soldier in the Maine Army National Guard: Leave
no one behind.

Over the last decades in our country, we have seen a dramatic growth in income disparity and policies that favor
and reward “Wall Street capital” and excessive c-level compensation while allowing our investments in our human
capital – our people – to erode.

As one of the people I admire, former Maine Senator George Mitchell, put it during a conversation on the day I
announced my run for Governor in April 2017, technology and competition will always result in dislocation and
some lost jobs over time. It is no one’s fault that people are not still manufacturing stage coaches in York County.
Innovation by Henry Ford led to the creation of the automobile. What Senator Mitchell said, however, was that
over the past 70 years as a country we have failed to apply ourselves to the challenge of developing policies that
truly help people get access to the skills and opportunities they need to get good jobs, especially when they lose
their job due to changes in technology or competition.

Backing up Senator Mitchell’s point is a recent report by Robert Atkinson of the Information Technology and
Innovation Foundation. It noted the United States now invests less than half of what it did on workforce
development programs 30 years ago as a share of GDP. Even worse, America’s Organization for Economic Co-
operation and Development (OECD) peers like Austria and Germany invest six or more times in workforce training
and support programs than we do.

So, for all those Maine people who are working hard, but feel like they have been left behind – you are not
entirely wrong. It needs to stop. Maine cannot afford to leave anyone behind. We cannot afford to waste any
human talent.

Over the past 12 months I have toured all 16 Maine counties, dozens of small businesses, and met with hundreds of
working Mainers. Everywhere I go, the need for improved workforce training is a top priority.

That is why, today, in conjunction with my friend and top state labor economist John Dorrer, I am proud to release
my “Leave No Mainer Behind: The Maine Human Capital Investment Fund” proposal to reform, modernize, and
invest in connecting Maine people to good jobs.

My plan calls for a $75 to $100 million bond investment to create a one-stop place for small businesses, trade
organizations, and individual Mainers to gain access to the training and development they need to move into good
job and career opportunities.

This proposal would make Maine an innovative, national leader on a new generation of workforce training. This is
the right thing to do for Maine people, Maine communities, and Maine’s economy. Let’s be bold. Let’s rebuild
Maine’s middle class. Let’s leave no Mainer behind.

-Adam

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 WHERE WE ARE TODAY: MAINE’S ECONOMY IS LAGGING ON JOB, INCOME, AND ECONOMIC GROWTH

Any plan for the future starts with an assessment of where things stand today. Let’s look at where Maine’s
economy stands competitively with our region and the country.

Maine’s economy: We are lagging behind

Economic Growth Job Growth

Here are the facts that Maine people know well. Over the last seven-plus years, Maine has lagged New England and
the country when it comes to economic growth (left), jobs growth (right), and income growth.

• While Maine’s Gross Domestic Product only grew by 3% from 2011-2016, New England’s grew twice as fast
(6%) and the country’s grew more than three times as fast (10%).

• Maine took several years longer to regain the jobs lost during the Great Recession. If Maine had kept pace
with New England we would have more than 5,000 additional jobs today – and if we had kept pace with the
country, we would have more than 28,000 additional jobs.

MAINE HUMAN CAPITAL INVESTMENT FUND: PROGRAM SUMMARY

Leave No Mainer Behind: The Maine Human Capital Investment Fund

Continuously upgrading the skills of Maine’s workforce is essential to sustain economic growth in the context of a
global economy and pervasive technology innovation. The Maine Human Capital Investment Fund (MHCIF) will be
established to finance the ongoing job training of workers and industries at a scale commensurate with growing
needs. Through the issuance of bonds, MHCIF will raise 75 to 100 million dollars to support job training
requirements of workers and industries aligned with market conditions. Bonds could be issued under a general
obligation (guaranteed) and/or moral obligation (non-guaranteed) basis. The fact that job training is an investment
with returns in the form of increased wages and improved productivity occurring over years as opposed to an
expense justifies a bonding approach.

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The use of bonding to raise the resources we need to secure our future gives every Mainer the opportunity to
become a stakeholder in the economy. Existing administrative systems such as the Finance Authority of Maine
(FAME) could be used to handle the fund’s administrative functions. States such as Iowa, Missouri and Kansas offer
examples where bond financing has been used successfully to expand economic and workforce development
investments.
The Context

The Maine economy benefits from a highly skilled workforce. A powerful convergence of globalization, technology
innovation and constant market disruptions however impact the nature of work and the makeup of industries in
our economy. These developments are leaving thousands of workers unemployed and many employers unable to
find worker with the right skills at the same time. The persistence of job vacancies when combined with the export
of jobs by Maine firms amounts to serious economic loss in the form of foregone wages and taxes. Failure to
reverse these negative impacts undermines economic growth and the ability to offer better futures for our children.

Our aging population and challenging demographics present extraordinary challenges. Maine’s unemployment rate
of 2.9% is at a historical low. Yet, we still count nearly 20,000 Mainers as unemployed and according to a more
encompassing definition from the Bureau of Labor Statistics, there about twice as many workers who are
unemployed; discouraged from looking for work; or working fewer hours over what they would like. Of the
unemployed, 7500+ are currently receiving unemployment insurance for an average duration of 13 weeks. Workers
unemployed 26 weeks or more make up about 25% of unemployment insurance claimants. Labor force
participation rates have dropped from 66% in 2008 to current levels of 63+%. Particularly hard hit by reduced labor
force participation are prime age males who lost jobs during the recession of 2008-2009 and have not come back to
work. Too often, their skills no longer match the needs of today’s labor market. Nearly 28,000 individuals between
the ages of 18-64 were reported as Social Security Disability Insurance claimants in 2015. These individuals
represented nearly 5 percent of Maine’s labor force. According to data from the National Kids Count, estimates
indicate that 13,000 young people between the ages 18-24 were out of school, out of work and had no diploma
beyond high school. Maine simply cannot afford to waste human talent.

The federal and state governments have in place a patchwork of job training programs largely underfunded (as
noted in the introduction) in relation to the full scope of needs. Furthermore, existing job training programs have
limiting eligibility criteria that prevent most workers from being able to access them. As these funds are typically
authorized under operating budgets and therefore must compete with other pressing needs, they come up short.
These trends will continue and most likely, accelerate in years ahead. While high performing K-12 and
postsecondary education systems are essential in building the foundation for workforce development, an even
more comprehensive and innovative approach to job training and retraining is needed. We must ensure that our
employers and their workers are able to keep up with escalating skill requirements and the dynamics of industry
restructuring without suffering business reversals, long term unemployment and income loss. Large scale human
capital investment is essential to improve and sustain Maine’s economic growth.
How Would the MHCIF Work?
The MHCIF would be accessible to Maine businesses and workers alike, granting low interest loans and grants for
purposes of workforce skills development. Businesses hiring workers in need of skills, either individually or as a
consortium of firms, are eligible for a loan to fund skill training including on the job training, apprenticeships and
classroom. Workers, both employed and unemployed, would be eligible for loan amounts based on the type of
training proposed. Worker loan obligations could be assumed by employers upon hire and employment retention
giving these employers a competitive edge in a tight labor market to attract workers. MHCIF would provide for
more negotiated approach directly between employers and workers as well as give more flexibility in the use of
training methods (work-based versus institutional centered).
Program Metrics – Funds specifically support measurable, reportable skill gains and jobs for Mainers

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The MHCIF will develop rigorous metrics for judging which proposals receive support based on measurable skill
gains and jobs created for Mainers. While there have been many well-meaning economic development efforts over
the years, many programs that sounded good in a crisis have not been set up to measure clear, delivered economic
advantages for Maine people versus attracting or propping up a particular company’s bottom line. Maine people
are the shareholders to whom MHCIF decision-makers will be accountable, not some Wall Street hedge fund
manager.

MHCIF will guard for efficient use of public funds by requiring clear metrics in its application process, its funding
decision-making, and it will guard against “tuition inflation” by looking back at reasonable ten-year average costs
for any training, education costs involved. (For example, a training course that costs $4,200 is 2018 will not be
allowed to cost $8,400 after MHCIF decides to become supportive.)

Finally, another advantage over many other past programs is that much of what the MHCIF will do will be in the
form of low interest loans ensuring that both workers and employers "have skin in the game," a significant change
over previous giveaway and incentive strategies. Furthermore, with evidence of a healthy, growing Maine
economy, the MHCIF can be sufficiently flexible to support loan forgiveness and the opportunity for workers with
loans to negotiate with potential employers to assume loan repayment obligations. These elements add the power
of market forces and bargaining in a competitive labor market.

FOUR SCENARIOS – HOW IT WOULD WORK

Scenario 1: Jon Smith, Retail Sales Worker

Jon has been doing retail sales work for 15 years and is dissatisfied with the low pay, the lack of benefits and limited
hours of work. He sees demand for traditional retails sales workers steadily declining as more chain stores close and
online shopping is growing.

Jon wants to upgrade his skills and seek out new employment opportunities. He is unable of quit work and go to
school full time. He has seen a few online job ads for customer support specialist positions offered by a local
financial services firm that look attractive. He takes a chance and makes an application and get an interview. The
interviewers like Jon’s attitude and disposition but he lacks knowledge and skills to “hit the ground running.” He is
called back by the firm for a second interview where options for training are discussed including the following:

• A structured 6 month on the job training program provided by the firm

• A course at the local community college covering key software packages used by the firm
• A couple of additional online courses in finance and investment

Jon is encouraged to make an application for a low interest loan to Maine Human Capital Investment Fund at the
Finance Authority of Maine to cover training costs identified in a jointly developed training budget. The employer
offers Jon a willingness to assume loan repayment responsibilities at the end of the three- month probationary
period and with continuation of successful job performance. Jon completes an online application and secures the
loan to cover training costs.

Scenario 2: Shirley Bilodeau, Commercial Driver’s License

Shirley recently lost her job at a paper mill in rural Maine. She is interested in obtaining her commercial driver’s
license (CDL) because these are very good paying jobs available in her part of Maine. Shirley finds a local school that
offers a 6-week CDL training course from which all graduates get hired, but does not have the $4,200 tuition for the
program. Shirley is told there are several options, among them:

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 • A trucking firm that has worked out a program with the Maine Human Capital Investment Fund to fill their
CDL driver needs has offered to pay her tuition back over three years on successful completion of her
course work and employment with the firm.
• Shirley can personally borrow from the Maine Human Capital Investment Fund and pay her loan back
herself over 5 years when she gets a job with a company of her choosing. In a tight labor market, Shirley
could also negotiate with the employers that want to hire her to assume her loan obligations as part of an
employment contract.

Scenario 3: Maine Composites Manufacturing Corp.

A medium size manufacturer of composite materials has secured a long- term contract to supply his materials to
national wholesale operation. To meet the demand, the company will need to expand its workforce by 15 workers.
This will be difficult as the company has been challenged finding the skilled workers needed even though wages are
competitive. The pressures of an ambitious production schedule mean that workers must hired and contribute to
meeting production goals. A program at the local community college offers a limited number of graduates annually
but not enough to meet the company’s needs. The timeframe for implementing an apprenticeship program is too
long. The employer decides to customize a training program and seek a loan to develop and operate the program
through the Maine Human Capital Investment Fund. The customized program includes:

• Online courses available through a national trade association

• Hiring of an instructor to teach a course on site
• A customized on the job training curriculum

An online application along with a budget is developed and submitted to FAME for review. The application is
approved and the company receives a low interest loan to recoup costs. Incentives and credits may be developed
and applied to the loan to reward job creation, wage increases and employee tenure
Scenario 4: Maine Trade Union Apprenticeship Initiative

Maine ranks near the bottom nationally in making use of apprenticeships according to the U.S. Department of
Labor. Maine’s shipyards and trade union with 4,000 members have identified innovative, high wage-high skill
welding jobs in need of workers. Many of these jobs are going to people from other parts of the country because
there is no training or apprenticeship program in the area that teaches this type of welding. The union and
employer reach out to the Maine Human Capital Investment Fund to explore options. They include:

• Developing a partnership with a local community college to design and deliver a training program that
includes classroom and on the on the job training including purchasing the equipment required to train its
members over an 8-week course.
• Designing and implementing a 3-6 on the job training program resulting from employer-union
collaboration. The MHCF would provide a full or partial loan to cover the cost of an in-house program.
Trainees learn skills and have a path to full-wage positions over 3-6 months.

Photo credits, front cover: Ben McCanna, Robert F. Bukaty, UNE