AUGUSTA – Depending on who you talk to, Maine has debt approaching $5 billion or debt of less than $1 billion. The difference occurs when defining what constitutes debt that the taxpayers are obligated to pay.
The unfunded liability in the state retirement system is a debt that taxpayers are “ultimately” responsible to pay, according to Rep. Sawin Millett, R-Waterford. If that is added to the various bonds, the total debt that Maine taxpayers are responsible for is nearly $5 billion.
Another area of concern, Millett said, involves bonds sold without voter approval.
“I worry about further proliferation of the kind of entities that we have created by statute,” he said. “I worry that we do more of what the voters don’t see in terms of debt.”
Most of the state’s debt has never been approved by voters and borrowing entities like the Maine Municipal Bond Bank, Maine State Housing Authority, Finance Authority of Maine and Maine Government Facilities Authority pledge some revenue source or asset instead of the “full faith and credit” of the state.
“It is secured debt,” Finance Commissioner Becky Wyke said, “the facilities authority debt is secured by whatever building is pledged for the work that was done on it, so it is secured.”
That means the State Capitol Building, which was built in 1830, and has been expanded over the years, is the security pledged to pay for the renovations made to the building through loans from the Government Facilities Authority.
Wyke said the pledging of a particular revenue source, like tolls on the turnpike to pay for turnpike renovations, is a long-used borrowing mechanism. She acknowledged the use of debt secured by an asset, like a state-owned building, is relatively new.
“But that does not mean we are not closely looking at it,” she said, “every time we go out to sell bonds, the bond rating firms look at our entire debt picture, and it is something I know I spend a lot of time reviewing.”
But, Wyke acknowledged that is not the same as the public scrutiny that occurs when the Appropriations Committee reviews bond proposals and the entire Legislature votes on whether to send a bond proposal to the voters.
Wyke said unlike the “hard debt” that the various bonds comprise, the unfunded liability of the state retirement system is “soft debt” that is really a best estimate of what it will take in investments to assure all retirement benefits will be paid.
“For example, if the investments of the retirement system do better than expected, that reduces the unfunded liability as much as increasing the state contribution,” she said.
According to figures compiled by the Legislature’s office of Fiscal and Program Review, Maine had $559 million in bonds both issued and unissued as of June 30, 2005. Voters approved another $74 million in borrowing last November. In addition, there is also tax supported debt like the $189 million of bonds issued by the Governmental Facilities Authority.
The authority debt has increased dramatically from $18.5 million in 1999 to $189 million as of last June 30. But unlike many states, Maine has also reduced the total bond level (both sold and unsold) from $588 million in 2000 to the $559 million as of last June 30.
Maine spent $110.8 million on debt payments in the budget year ending June 30, 2005, and $26 million was for non-voter approved debt.
The state will have to provide updated figures on its debt to the bond-rating firms in June when the state is planning its next sale of bonds.