Borrowing to repair roads is not a good way to manage tax dollars.
The $60 million highway bond proposal figures to be one of the most intensely debated issues when the Legislature reconvenes on May 22. The Sun Journal has made it clear where it stands: 100 percent in favor of borrowing money to fix our roads. In an April 29 editorial titled “Roads crumble, legislators fiddle,” the writer rebuked the Legislature for failing to pass the measure last month.
On April 27, the House did pass the supplemental Highway Fund bill, LD 1974, with no bond package. But when the bill moved to the Senate, the bond was tacked on, violating an agreement between legislative leaders made earlier this spring. The last-minute insertion of the bond issue has left the bill in legislative limbo.
The editorial charged that the stalemate reflected “a cockeyed sense of fiscal restraint.” But there is much more to this issue than meets the eye.
The bond itself is called a GARVEE, for Grant Anticipation Revenue Vehicle. It carries an interest cost of $24 million, bringing the total to $84 million. The idea is to pay for the bond with federal highway money that arrives over the next 15 years, but borrowing against future revenues would limit the funds available to legislators through 2022.
Unlike regular bonds, which require a two-thirds majority of the Legislature, GARVEE bonds can be passed by a simple majority. And while regular bonds also need voter approval on Election Day, GARVEE bonds do not. In this case, however, the bond would be sent to the voters in November anyway, as political cover. We can predict the outcome. As the editorial noted, “Road bonds nearly always pass, reflecting the priorities voters place on fixing potholes.”
Here’s where it gets interesting. If voters approve the GARVEE, the Department of Transportation would not actually get the money until April or May of 2007. By then, a new Legislature will be in place. If roads are still a problem, the new lawmakers could include more money for repairs in the next biennial budget, which will take effect next summer. Alternatively, a bond issue could be placed on the June ballot.
Nobody denies that our roads are in rough shape. Winter rains and freezing temperatures created frost heaves and broke up road surfaces. But if the GARVEE proposal dies in the Legislature – as it should – the roads will still be repaired. Maine will spend $269 million on highways this year and $271 million next year. The federal government will contribute another $200 million or so each year. If we need more, we could use some of the recently discovered $50 million surplus the state is running this year.
There are various ways to fix our roads without another bond issue. Legislators (and voters, too) need to realize that we cannot keep borrowing more and more, leaving a huge debt to our kids. Debt service already devours about 20 percent of the state budget, a stunning amount. The Maine State Retirement System, which pays pensions to retired teachers, has an unfunded liability of about $3 billion. The state’s required contribution this year is $260 million, roughly 10 percent of the General Fund. We also owe $1.2 billion (and growing rapidly) to the program that covers health insurance for retired teachers and state workers.
All told, we are $5.3 billion in debt. Adding $84 million in one-time money for highways makes it that much worse. Killing the GARVEE bond would be fiscal restraint that is anything but “cockeyed.”
Rep. Joan Bryant-Deschenes, R-Turner, is an attorney and a business owner. She serves on the Judiciary and Ethics committees.