AUGUSTA -- A critical component of Maine's long-term economic recovery is investment in higher education. But that's not where the state has put its money in recent years, a former Maine state economist said Thursday.

Investment in Maine's colleges and universities is "the most critical thing we can do for the future of our state," said Laurie Lachance, now president and chief executive officer of the Maine Development Foundation.

But that investment has dropped off during the past few decades as a percentage of state spending, Lachance told Augusta Kiwanis Club members.

In 1968, she said, 18 percent of the state General Fund supported higher education. In 2007, it was down to 9 percent.

People with higher education levels are less likely to be unemployed and are more likely to have high incomes, Lachance said.

But the two state agencies that can boost education levels are sharing in the budget pain in the biennial budget that goes into effect July 1. Maine's seven community colleges will lose $2.5 million in state funds in the coming fiscal year. That cut brings the system's state funding level to $57.3 million.

Maine's seven public universities are in tougher shape. The University of Maine System will sustain a $7.5 million state funding cut in the 2009-10 academic year. That leaves the system with $202 million in total funds.

The system's Farmington, Orono and Southern Maine campuses have announced millions of dollars in program and job cuts for the coming academic year. And a systemwide task force is developing plans to plug an anticipated $42.8 million deficit over the next four years.

Maine's turnaround from the current recession will be slow, Lachance said. In the early 1990s, when the last major economic downturn hit the state, it took 4 1/2 years before Maine regained the 35,000 jobs it lost, she said.

"It'll be slow-going for a little bit, but hopefully we'll see that turn."

And once that turn comes, Lachance said, the state will be well positioned, due to the relative health of its banking sector.

"Our banks are healthier than they were in the last downturn," she said.

Less than 1 percent of loans issued by Maine banks were past due at the end of 2007, Lachance said. That figure topped 5 percent in the early 1990s.

"We have a very strong base of community banks and very strong credit unions," she said. "And that bodes well for Maine."

Matthew Stone -- 623-3811, ext. 435

mstone@centralmaine.com