It’s the first week of the new legislative session, but the clock is already ticking on a bill that would allow Maine counties and municipalities to declare bankruptcy if they default on their debts — something that could happen within weeks in Washington County.
While officials there are optimistic they will be able to pay back roughly $8 million in short-term loans by late February or strike a deal with Machias Savings Bank to refinance, a default would be unprecedented in Maine’s history. The state has no laws foreseeing such a situation.
A bill proposed by a Down East lawmaker is just beginning to move forward in the Legislature. It could provide an off-ramp for the county if it is passed by the Legislature on time. Officials in other counties are watching its progress amid budget strife in several other areas of the state.
The measure emerged as a proposal from Sen. Marianne Moore, R-Calais, on the heels of years of budget mismanagement, poor accounting and limited auditing. Washington County rejected an $11 million bond in the November election, giving the county limited options to deal with the short-term crisis.
Moore’s bill is waiting for a hearing from the legislative committee overseeing local government, but has not yet been scheduled for discussion. It has only Republican sponsors, though it received support from the Democrat-run Legislative Council when the bill was pitched this fall.
Washington County Commissioner David Burns has repeatedly expressed skepticism about the idea of bankruptcy, and he said that the proposal is not factoring into his contingency planning for the county. But the former Republican state lawmaker acknowledged that it could become one of the only options for the county if its current plan to pay down debt fails.
“Regardless of everything with Washington County going on, I think it’s something that the state really needs to have for all counties and all towns, and to at least allow that possibility,” Rep. Will Tuell, R-East Machias, a co-sponsor of the measure, said.
Penobscot County is dealing with a $7 million budget crisis largely driven by years of jail cost overruns. Commissioners there recently passed a $35.3 million budget, but long-term problems remain. It will require a tax increase of nearly 16%, which was slightly lower than one passed in Washington.
“Given current economic realities in our state, both in terms of executive policies and undeniably excessive overall tax burden on Maine taxpayers, I believe it is appropriate to at least have this legislative tool available, for those that may ultimately need to consider using it,” Rep. Mathew McIntyre, R-Lovell, another co-sponsor, said in a statement.
Outside of Down East Maine, county officials were hesitant to express support for creating a bankruptcy option. York County Commissioner Justin Chenette, a Democrat, said the idea “absolves us of responsibility” to manage budgets responsibly.
Franklin County Commissioner Tom Saviello, an independent and former state lawmaker, said he was in favor of it, but he suggested it was only a partial solution to financial troubles that have gripped several parts of the state.
“I think you’ve got to get them the ability to do that,” he said. “And I think the second part, you need to hold somebody responsible.
Daniel O’Connor is a Report for America corps member who covers rural government as part of the partnership between the Bangor Daily News and The Maine Monitor, with additional support from BDN and Monitor readers.