When Gov. Paul LePage took office, he made it clear he doesn’t like debt – really doesn’t like it. Rather than the routine financial transaction it is for most states, businesses and families, LePage spoke as if borrowing money were morally damaging. Still, at the time no one knew how far he’d go to slay the debt monster, never mind the cost to the economy or the democratic process.
LePage laid down a marker early on: Debt issued by quasi-independent agencies such as the Maine Bond Bank and Maine State Housing Authority was suspect, he said, because voters hadn’t approved it. These bonds are different from the ones we approve in referendum; they don’t pledge the state’s “full faith and credit.” That cut no ice with LePage, and his allies quickly replaced the long-time head of the bond bank, and later forced out the director at MSHA.
Still, one presumed bond issues that had been approved by voters were safe, but they weren’t. In June 2012, LePage decreed that bond issues approved by the voters in 2009-2010 but not yet issued by the state treasurer were on hold.
This was stunning. The state constitution and statutes provide no role for the governor in creating and issuing bonds. The Legislature must propose them by two-thirds, and the voters ratify or reject them. The treasurer then issues bonds when he or she sees fit -– usually tied to interest rate cycles. True, the governor signs the warrant, but no one imagined that meant he could block their sale.
By scuttling bonds approved under the previous administration, LePage threw a monkey wrench into a wide range of development projects. Some could find alternatives, but it was a huge struggle for the Communities for Maine’s Future program, an innovative effort to fix up small, rural downtowns – generally LePage country. Some $3.5 million in state funding was matched by $7.5 million locally. By the time LePage pulled the plug, some checks had already gone out.
Even worse off was the ever-popular Land for Maine’s Future program, where bonds are the only revenue source. LMF had land agreements ready to go through a $9.75 million land conservation bond; voters later approved another $5 million LMF bond in 2012, but that is also on hold.
Now, as it happens, Maine has guidelines for how much debt to carry. In the late 1970s, when interest rates soared and debt ballooned, the Legislature adopted two rules. The first, a temporary measure, capped new bonds at 90 percent of those being retired. The second imposed a 7 percent cap on the proportion of the budget devoted to interest payments.
Since then, Maine has stayed well below the cap –- generally 5 percent. But that wasn’t good enough. The governor created the LePage rule –- interest couldn’t exceed $100 million a year.
To see how arbitrary this is, take the current year’s interest costs, $98.5 million. It represents 3.26 percent of overall spending. We could double interest costs and still be below 7 percent.
With the state economy still flat, one usually uncontroversial technique for revival is public investment. Borrowing rates are at record lows, and one might expect a bond package comparable to the one approved by voters in 2009-10, seven bond issues totaling $194.3 million. Instead, the 2012 package, a year late, totaled $76 million, and won’t be issued until next year unless LePage relents.
Until recently, LePage’s position, however questionable, was at least consistent. Then he decided borrowing really was OK, with a twist. He suggested Maine use proceeds from a future 10-year liquor contract to float a bond to pay off hospital bills, and also borrow $100 million for state prison construction. If the Legislature did that, he’d relent and issue bonds approved from 2009-12.
Incoherent is probably too kind a word for this maneuver. Does LePage really think borrowing for a state prison is more important than the $51.5 million transportation bond already approved, but still unissued? Borrowing to pay off hospital bills, meanwhile, sounds a lot like taking on more debt.
The governor’s actions have retarded economic recovery, and violated the process by which bonds are proposed and approved. At the very least, the Legislature should enact proposed legislation to formally remove the governor from issuing bonds, since he’s misused his authority. As for what will happen by June, when another bond package may be approved, it’s hard to see what role the administration can play.
To participate in the debate, LePage would have to have a plan. And it becomes increasingly clear that this administration has no plan.
Douglas Rooks is a former daily and weekly newspaper editor who has covered the State House for 28 years. He can be reached at email@example.com.