AUGUSTA, Maine — Gov. Paul LePage announced on Tuesday that he will release $105 million in bonds previously authorized by voters if the Legislature agrees to a $100 million revenue bond for a new prison and his newly announced plan to repay Maine hospitals hundreds of millions of dollars toward previous years’ debt.
The announcement represents a step away from LePage’s long-held refusal to issue the voter-approved bonds because he said the state’s financial position was not robust enough for borrowing. The governor often has cited the debt to hospitals as a prime example of bills that need to be paid by the state before more debt is accrued.
The state’s hospitals are owed $484 million from the state’s MaineCare program, which is an extension of the federal Medicaid program. Of that sum, the state is responsible for $186 million; the rest would flow to Maine hospitals from federal matching funds.
LePage proposed Tuesday that the $186 million come from revenue bonds that the state would issue against future earnings from liquor sales. As part of the plan, the governor also is proposing that the state reacquire liquor operations that were privatized in 2004. That means that if the plan is approved by the Legislature, the Maine Bureau of Alcoholic Beverages & Lottery Operations would assume oversight of liquor distribution but would continue to subcontract distribution and delivery.
“By paying the state’s bills, we strengthen our economy and the hospitals that care for and employ Maine people,” said LePage in a Tuesday afternoon news release.
As recently as Friday, when members of LePage’s Cabinet released details of the administration’s biennial budget proposal for the two fiscal years beginning in July of this year, LePage said he intended to approve the voter-authorized bonds during the next couple of years. Tuesday’s announcement that he will issue those bonds this year, contingent on the Legislature agreeing to his plans for the hospital debt and new $100 million correctional facility, represents a major change in the governor’s position.
The voter-authorized bonds include $51.5 million for transportation infrastructure and improvements and $53.5 million for conservation, clean water upgrades, and construction and energy-efficiency programs at postsecondary educational institutions. Some of those bonds were authorized by voters in 2009; three of them were approved in November 2012. Under statute, the state has five years from the date of voter approval to issue the bonds.
Within those bonds are improvements to community dental clinics, energy upgrades within the University of Maine System and projects involving the state’s airports, ferry terminals and railroads.
In June 2012, LePage issued a letter to state agencies informing them that he would not sign the previously authorized loans.
“You should not budget for bond revenues without clear approval from me,” the governor wrote. “It is our duty as public servants to ensure each taxpayer dollar is spent appropriately to earn the highest return at the lowest cost. That is especially true when we are spending borrowed money — money that has to be paid back by future taxpayers, with interest. … Each project that these bonds provide for may be worthwhile and, if you are able to pursue them without debt, I am happy to work with you on the way forward for that. However, the earliest I currently believe it may be prudent to issue new bonds is January, 2014.”
LePage also will pursue through the Legislature a $100 million revenue bond that he says can be repaid with savings he expects to recoup through efficiencies associated with running an up-to-date prison. Adrienne Bennett, LePage’s press secretary, said Tuesday that the new efficiencies might involve the closure of other facilities in the Department of Corrections, though she declined to say which ones when asked by the Bangor Daily News.
“We’re working on it,” she said. “I can’t give you a response right now. That’s down the road.”
Democratic legislative leaders did not jump behind LePage’s announcement Tuesday.
“Any new revenue from the liquor contract must be considered in the context of the budget the governor released last week,” said House Speaker Mark Eves, D-North Berwick. “The hospitals’ debt is one of the many competing obligations we have. Our top priority must be to strengthen the economy and rebuild our middle class — not shift costs to Maine people and small businesses.”
According to the Maine state treasurer’s website, the state has about $472 million in outstanding general obligation bonds. Annual payments for bonds supported by the General Fund — which represents the majority of state spending but does not reflect transportation projects in the Highway Fund — are at a high point since at least 1980. Those debt payments totaled $90 million in 2010; $87 million in 2011; $95 million in 2012 and nearly $99 million in this fiscal year. In 2014, the payment is scheduled to drop to about $78 million, though that likely will change if LePage’s ambitions as he outlined them Tuesday come to fruition.
Bennett said Tuesday afternoon that LePage’s change of heart was connected to the possibility that the hospital debt could be zeroed out this year and that another prison could be built with a revenue bond that would have no net impact on the General Fund.
“The governor has always said that when it’s fiscally prudent, when we were in much better shape to absorb debt, that he would sell those bonds,” said Bennett.
