Robust bond package is key to economic recovery

0

As Maine struggles to rebound from the Great Recession, the Maine Legislature can fuel that recovery by passing a substantial bond package to fund much-needed public infrastructure, preserve and create jobs, and reinvigorate economic growth. Recently, the Maine House passed an $85 million bond package, but the Senate failed to muster the two-thirds majority needed to send the package to the voters in June. The Legislature will meet again Monday in an effort to reach a final agreement.

Targeted, timely government investment in the economy works for all of us. During the Great Depression, New Deal programs put millions of Americans back to work and, in the process, built roads, dams and other infrastructure that spurred economic recovery and proved invaluable when the nation went to war in 1941. Similarly, the 2009 American Recovery and Reinvestment Act, proposed by President Barack Obama and enacted with the bipartisan support of Maine’s entire congressional delegation, has created or saved 10,000 jobs in Maine.

The ARRA put the brakes on the downward trajectory of Maine and the nation’s economy. There are also hopeful signs of economic growth, but we still have a long way to go just to restore all of the jobs lost during the Great Recession. While our unemployment is still below the national 9.7 percent rate with 8.3 percent of Mainers unemployed, we need leadership at the state level to encourage employers to hire and to put people back to work.

Although Maine does not have the financial resources needed to undertake an initiative as ambitious as ARRA, the state clearly does have the capacity to use its bonding authority to make some critically valuable investments that will also yield new jobs.

Advertisement

In March, Senate President Elizabeth Mitchell and House Speaker Hannah Pingree offered a $99 million bond package while Gov. John Baldacci has made a more modest $79 million proposal.

The Baldacci administration estimates that the governor’s proposal would create almost 2,000 jobs. MECEP projects that the Mitchell-Pingree proposal would generate more than 2,400 jobs. Both proposals include funds to preserve more than 200 miles of Montreal, Maine and Atlantic Railway tracks in Aroostook County and save another 750 to 1,000 jobs.

Bond opponents raise concerns that additional borrowing would overextend the state, but there is ample evidence to the contrary.

Even with adoption of this bond package, the FY 2010 debt service ratio of general obligation debt as a percentage of general fund, highway fund, and revenue share revenues would be 3.52 percent. The ratio in FY 2011 would still be only 3.72 percent, well below the long-established 5 percent debt-to-revenues limit that has governed Maine’s bonding policy for many years.

Failure to take action to stimulate job creation is a much greater threat to state government’s fiscal health and our economy. People who are once again receiving paychecks will no longer need government help to pay their bills and support their families. Putting Mainers back to work and reigniting economic growth will erase chronic budget shortfalls without raising taxes.

The proposed bonds would provide millions of dollars to improve roads, to build sewage treatment plants and other environmental facilities, to improve energy efficiency and to make other specific investments in infrastructure. In many instances, the state funds will generate many millions more in federal funds. For example, every dollar in state funding for the Drinking Water State Revolving Fund will leverage $5 in federal funding.

Many of the projects would bring tremendous benefits to local communities. Central Maine, for example, would gain from $5 million to purchase the St. Lawrence and Atlantic rail line from Yarmouth to Auburn and make improvements to enhance freight rail service and prepare for future passenger rail service.

MECEP urges the Legislature to give final approval to the $85 million compromise and send it to the voters for their approval in June. The jobs created and the projects funded will demonstrate the leadership we need to renew economic growth and assure greater prosperity for all Maine families.

Dan Coyne is a fiscal policy analyst with the Maine Center for Economic Policy in Augusta.

Advertisement
SHARE