WESTBOROUGH, Mass. – Maine’s economy is expected to make a slow, steady recovery and job numbers are expected to climb after two years of stagnation, but there’s a caveat.

Two pending ballot questions have the potential to “create a significant fiscal crisis in state and local government,” said Charles Colgan, public policy professor at the Muskie School of Public Service at the University of Southern Maine. And that could mean fewer jobs.

Colgan made his remarks at the New England Economic Partnership annual meeting, a yearly conference that forecasts New England’s economy. This year, it focused primarily on jobs.

In general, Maine’s economy is on the rise, with increased output and an anticipated 5,000 new jobs, according to Colgan’s research. The jobs are expected to occur primarily in education and health-care industries.

“The overall performance of the Maine economy is remarkable for having occurred at a time when job growth in the U.S. was negative and when manufacturing in Maine was taking a particular pounding,” said Colgan. From 2001 to the beginning of this year, Maine lost 2,000 jobs on an annual average basis, a “relatively mild” reduction compared with the rest of the U.S. In 2003, there were 606,000 jobs in Maine.

From 2000 to 2003, Maine lost nearly 18,000 manufacturing jobs or more than 22 percent.

Offsetting those losses and others were gains in the services sector, nearly 21,000 new jobs over the same period of time. Health services grew by 11,500 jobs; government by 4,700 jobs; wholesale and retail trade by 3,300 jobs; and construction by 2,000 jobs.

The growth in the state’s goods and services output is expected to remain in the 2.5 to 4 percent range, somewhat behind the national rate, but still solid. And migration patterns have begun to change, showing a net increase of 10,000 new Mainers over the past two years.

But looming in the wings are two tax reform proposals that Colgan said could chill the recovery. The first, which will appear on the June 8 ballot, would requires the state to increase its share of school funding from the current 46 percent to 55 percent. Colgan predicts this would cost about $260 million to enact or 10 percent of the state budget.

The second measure will appear on the November ballot. It would implement a tax cap similar to California’s Proposition 13, and it could result in a loss of $600 million in property tax revenues.

The state could find itself looking at increasing income taxes or sales taxes to make up for the shortfall, or at drastically cutting school and municipal budgets. Colgan said 20 percent of local government jobs could be eliminated in a worst-case scenario.

He added that the failure of the Legislature to act on even very modest tax reform makes the future even more unpredictable.

“No firm conclusions can thus be made on the effects of these referenda on the economic outlook,” he said, noting the probable economic impact of the first measure is much less than the second.

Overall, the job picture in New England is brightening. After 11 quarters of job losses, the New England job market expanded for the first time in 2004. But the region is not expected to recover the jobs lost over the past three years until the third quarter of 2006.

– Staff Writer Carol Coultas