I am writing to address some statements made by Douglas Rooks in his column, “Hospital payback battle is sideshow to the main event: implementing Obamacare,” published March 17.
Rooks criticized Gov. Paul LePage’s plan to pay state bills to Maine hospitals with a revenue bond tied to the state’s liquor contract, saying it required borrowing to pay off the debt and complimented the Democrats’ plan for front-loading years of liquor payments to the state.
Rooks apparently does not understand the mechanism by which the governor’s plan would use the long-term cash flow of the liquor contract to collateralize the debt, a process known as defeasance.
The advantages of defeasing the debt include much lower borrowing costs and the debt would not appear on the state’s balance sheet, which would protect Maine’s credit rating. This is a widely used and highly respected financing mechanism utilized by pension funds, insurance companies and a variety of other large investors. It is likely that the revenue bonds would be issued with a 3-4 percent interest rate.
The alternative plan calls for the winning bidder to make an upfront $200 million payment to the state. Rooks feels that is a better deal for Maine. Perhaps he did not hear the testimony of those investors who would be asked to front the $200 million.
Those investors will also require a return on their investment. The last liquor contract is revealing, as the return on equity to those investors was in excess of 25 percent. Maine taxpayers can ill afford to pay the difference of more than 20 percent on a $200 million advance over 10 years.
Rooks further argues that implementing Obamacare is the real issue here and, surprisingly, he may be right. However, he seems to misinterpret the administration’s position. The Republican position on the Department of Health and Human Services budget has been consistent: we must live within our means.
Rooks calls Obamacare “fully funded” when, in fact, the federal government is borrowing 30 cents of every dollar spent and has a $16 trillion debt.
That is nothing short of ludicrous. The fiscal responsibility we demand in Maine needs to be demanded of the federal delegation.
The governor is in negotiations with the federal government regarding expanding MaineCare. It would be irresponsible not to negotiate on behalf of the citizens of Maine. And while this may run contrary to what he had previously stated, the governor is known as a very tough negotiator. I expect that he may be discussing all those expansions to MaineCare that Maine has previously made, and asking what the federal government will do for us.
I would not have it any other way.
Rep. Richard Malaby, R-Hancock