The dropping interest rate makes this is a prudent time to borrow.

It is only natural that Maine people worry about the state’s debt. We are living in extraordinary times regarding budget. That is why I want to clarify the bonding process.

First, I would like to point out that our beloved Lewiston-Auburn area has a lot to gain by the passage of the recent development bond and the upcoming November bond package. Androscoggin County is targeted as a Pine Tree Zone, with money to invest in transportation and funds to expand Lewiston-Auburn College.

Furthermore, the interest rates are so low it is timely to invest in Maine. We have to invest in our state as we do in any other business; we cannot possibly pull ourselves out of this economic slump.

Maine’s debt is like a Ferris wheel: just as riders get off allowing new riders to get on, each year Maine retires old bonds and issues new ones.

The state borrows money to pay for projects by issuing bonds. A person or institution that buys a Maine bond is loaning the state money in return for interest payments until the bond is paid off and they get their original investment back.

Bonds spread payments for projects over their useful life so that all citizens benefiting from the projects pay for them.

The state Legislature decides which projects it believes should be funded from bonds and puts the projects out for voter approval. And voters approve or reject each proposed project.

The state treasurer issues bonds to pay for those projects approved by the voters, or otherwise authorized by the Constitution.

The treasurer distributes the money acquired from the sale of bonds in accordance with the legislation authorizing bonds for approved projects, and makes payments twice yearly to bond purchasers until the maturity date, when the purchaser receives the principal payment.

The treasurer issued bonds the second week in June with an total interest cost of 2.79 percent – the lowest rate in memory.

As of May 31, Maine has $296.7 million in outstanding general obligation debt. Outstanding bonds are those that have been issued by the state treasurer.

General obligation debt is the tax-supported debt that must be approved by voters. This is the debt paid with tax dollars and it breaks down to $528 in debt per person, well below the U.S. average of $810 per person.

In addition to Maine’s low debt ratios, Maine also repays its debt in 10 years – the shortest of any state.

Maine practices very careful debt management, as can be seen by the low amount of debt, the low debt per capita figure and the rapid repayment schedule. Maine is rated by all three major rating agencies; Aa2, AA+ and AA+ by Moody’s, Standard & Poor’s and Fitch, respectively.

In their recent publication on the state of Maine, Standard & Poor’s wrote that the AA+ long-term rating “reflects the state’s favorable debt position, with a low debt burden and rapid amortization (repayment) schedule.”

Maine has a debt control formula called the “5 percent rule.” The state keeps its yearly debt payments on all tax-supported debt at or below 5 percent of general and highway fund revenues. This is a stringent formula, yet the state is well within it.

For the fiscal year ending June 30, the state’s debt payments are 4.6 percent of general and highway fund revenues. The projected percentage is expected to decrease for the next two years, and that takes into account the $60 million bond package that passed on June 10 and assumes that another $100 to $105 million is passed by voters in November.

The $60 million June bond question is expected to leverage an additional $134 million in federal and private matching funds. By passing the $60 million question, almost $200 million will come to the state.

This is expected to create 4,000 jobs and stimulate the economy. The Association of General Contractors states that for every $1 spent on new construction, it creates $2 in economic activity.

The $60 million question passed in June will bring economic development, jobs for our citizens and relief to municipalities all over the state. In addition, interest rates are the lowest they have been in about 50 years, making this an economically prudent time to borrow.

Rep. Margaret Craven of Lewiston serves on the Health and Human Services Committee.

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