Investment imperative | Faulty premises and short-sightedness underlie a backlash against bonds
Bad roads may be good for auto mechanics, but not for other businesses, public safety or everyday drivers. Just ask folks in Carmel. Conditions on Route 2 so angered town officials that they erected road signs with the governor’s telephone number.
Livermore Falls residents have similar reason to be concerned about their access to quality health services. Planned improvements to a local facility hit a snag when the governor refused to approve a $31 million bond package.
The governor cites unsubstantiated constitutional requirements and unfounded concerns about Maine’s fiscal climate to justify his refusal to authorize “moral obligation” bonds. Even more troubling, Gov. LePage has indicated his opposition to any bonding over the coming biennium.
If the governor prevails, critical investments in education, work force development, health care and infrastructure will fall by the wayside. Meanwhile, roads will continue to crumble and vehicle repair bills will rise. Maine communities, schools, businesses and health care providers will postpone or forego much-needed capital improvements.
Ironically, this approach runs completely counter to the governor’s campaign to make Maine a better place to do business. It’s like promoting homeownership while restricting access to mortgages. Responsible borrowing for investment is essential to business growth and personal opportunity.
Constitutional smokescreen
In February, the governor declined to sign a traditionally routine “moral obligation” bond package totaling $31 million, claiming that Maine’s Constitution requires a two-thirds vote of the Legislature and a popular vote in a referendum.
In 1971, the Maine Supreme Court ruled that “moral obligation” bonds do not require voter approval because state general funds do not repay these loans; the businesses, nonprofits and individual borrowers do. Every governor since the early 1970s — Republican, Democrat and Independent — has approved such bonds, which are issued and backed by legislatively established quasi-independent agencies. These bonds lower costs to borrowers through tax-exempt financing for “private activities” that provide a public benefit.
The package Gov. LePage recently rejected included funding for Franklin Memorial Hospital in Farmington to remodel a fire-damaged medical office building and construct a new facility in Livermore Falls. Projects at Husson University, Colby College, Fryeburg Academy, York Hospital and Waterville’s Inland Hospital were also denied financing. The governor’s startling refusal to approve these bonds will likely increase project costs and, in some cases, delay implementation. End users will likely pick up the added expense. The delays will forestall job creation just when it is most needed.
The governor’s position also jeopardizes future bond packages by the Maine Educational Loan Authority and MaineHousing, agencies that fill important needs in Maine’s economy and promote prosperity for many individuals and families. MaineHousing uses moral obligation bonds to finance the development of 250 multi-family units and 1,000 first-time home mortgages each year. Maine Educational Loan Authority bonds support affordable student loans. If the governor does not relent, many students may lose access to college education.
Responsible borrowing
Maine’s bonded debt per capita is lower than the average among states, and Maine’s bonded debt repayment remains below 5% of the state’s general fund appropriations. Without bonding, Maine stands to lose tens of millions of dollars in federal and private funding. Past bond issues have leveraged from 1-to-1 up to 5-to-1 in additional federal and private investments in Maine.
Despite the administration’s best efforts to paint a dire picture of Maine’s debt load, the facts tell a different story. While concern about future pension liabilities is justified, using it as a wedge issue and the primary basis to fund tax breaks that predominately benefit Maine’s wealthiest residents reveals a disconnect between sound fiscal policy and the governor’s stated commitment to the principle of “shared sacrifice.” It also fails to acknowledge that the lion’s share of our fiscal challenges stem from a historic collapse in revenues brought on by the recession, not by excessive spending. Adjusted for inflation, Maine’s general fund spending is lower now than in 2001.
The Legislature should part company with the governor and adopt a responsible budget that does not jeopardize essential public investment and includes a bond package to meet critical need and help create and protect jobs now and in the future.
One such proposal is LD 829, sponsored by Rep. Jeff McCabe, D-Skowhegan. This bill authorizes $100 million over five years for projects targeted to labor market areas with above-average unemployment. These funds would support transportation infrastructure, extend broadband Internet access, aid downtown revitalization, promote nature-based tourism and enhance work force training. We need such investment to bridge the divide between the “two Maines” and nurture shared prosperity for all Maine people. It’s an investment critical to Maine’s future.
Garrett Martin, associate director of the Maine Center for Economic Policy, can be reached at gmartin@mecep.org. Read more Public Engagement here.
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