AUGUSTA — Democrats are calling on Gov. Paul LePage to name the towns that he recently claimed were on the brink of insolvency.

The governor has refused to identify the municipalities. His decision has invited criticism that LePage exaggerated the claim during his Feb. 10 budget address to create a bleak financial outlook and fast-track his budget policies.

LePage’s comment about defaulting communities came during his budget address to a joint assembly of the Legislature. The governor deviated from his prepared remarks while attempting to underscore the state’s dire economic outlook.

“Because whether or not the state defaults, we have a couple of communities that are ready to default,” LePage said. “So folks, it’s a lot more serious than anyone is willing to give it credit.”

Democrats say that if there are communities teetering on bankruptcy, the governor should tell them so the state can step in to help, as required by Maine law.

“If a town is getting to a point where it can’t pay a creditor or municipal employees, run its schools or plow its roads, then there are legal procedures that we need to follow,” Rep. Sharon Treat, D-Hallowell, said Thursday.

Treat was referring to a law that allows the state to create a Board of Emergency Municipal Finance that essentially investigates, audits and takes over municipal functions if a town can’t pay its bills or provide services. The board has broad authority, including the ability to issue short-term loans and increase property taxes to pay down debt.

LePage spokesman Dan Demeritt has declined to name the communities the governor referred to in his budget speech. “The governor doesn’t think it’s his place to share that kind of news,” Demeritt said. “He was speaking in his budget address, and that’s as far as he wanted to go with it.”

Demeritt said he wasn’t aware of any communities approaching the state because they couldn’t pay their bills. However, he said, “the governor knows how to read a balance sheet” and he had identified a couple of communities that were in trouble.

Eric Conrad, communications director for the Maine Municipal Association, said no community had come forward with that kind of news. The MMA represents nearly all of the state’s municipalities, offering advocacy and advice on financial matters such as bonding.

“We’re just not sure what (LePage) meant when he said that,” Conrad said. “If there were communities approaching insolvency, we think we would know. But we don’t know if the governor was talking about pensions or something else.”

According to Conrad and MMA legal staff, it’s rare for a community to default. Conrad said nobody he spoke with at the association could recall an example of a town defaulting or initiating the state takeover outlined in Title 30 of Maine law.

Asked why the governor wouldn’t name the communities, Demeritt said the governor didn’t think it was appropriate, even though those towns would become public if they fell under Title 30.

Instead Demeritt spoke in general terms, saying one of the communities had been “in the news recently” because it was “losing its largest taxpayer.”

Treat, of Hallowell, said it was unlikely that a town teetering on insolvency wouldn’t reach out to its legislative delegation. She said she hadn’t heard any representative talk about such a situation.

Treat said she was concerned that the governor may have gone too far when he described the state’s financial outlook. She said such rhetoric had consequences for Maine’s reputation for business investment and issues such as municipal bond ratings.

“Making statements about solvency or insolvency creates an impression that things are disastrous in this state,” she said. “They aren’t.”

She added, “It’s just very important that statements like that reflect what’s really happening on the ground.”

Democrats said they were surprised to hear the governor’s remarks about defaulting towns.

“The governor’s speech was the first time we heard that there are municipalities in our state that are going bankrupt,” wrote Rep. Adam Goode, D-Bangor, in a recent press release. “The comments are even more worrisome considering the governor’s budget proposal to cut funding to towns.”

Goode was referring to LePage’s proposal to cut town revenue sharing, a significant income source for municipalities trying to hold down property taxes.

LePage advisers say his budget gives municipalities $94 million over the next two years, which is about 5 percent more than what was given this year. However, that increase is offset by a cut in revenue sharing.

According to the MMA, current funding would give towns 31 percent more than the governor’s budget in revenue sharing in the first year of the biennium and 35 percent more in the second year.

smistler@sunjournal.com