Google the name “Paul LePage” and the phrase “fiscal house in order” and you get more than 55,000 hits. Putting that house back in order was a major theme of his campaign.

When Democratic Gov. John Baldacci moved out of the Blaine House and LePage moved in, there were two potentially crushing liabilities on the state’s balance sheet: multi-million-dollar debts to the state’s pension system and to hospitals for late Medicaid payments.

LePage is known mostly as the former general manager of Marden’s string of discount stores, but before that he was a “turn-around” specialist — the MBA you hire when your business is on the ropes, often due to too much debt, overspending and inefficiencies.

One of LePage’s oldest friends and golf buddies is Alan Rancourt, the president of Kennebec Federal Savings in Waterville, who recalled LePage’s days as an executive at the now-defunct Scott Paper plant in Winslow and as a gun-for-hire business consultant.

He said when LePage came into those jobs, the first thing he did was “get the invoices … you paid the people who supplied the lumber because if you don’t pay them, then the whole process goes away.”

The “invoices” on his desk when LePage was inaugurated on Jan. 5, 2011, included $4.4 billion in debt to the pension system because the state had underpaid into the system for years and pension investments took a hit from the recession.

Unless something was done about the debt, it would soon go from eating up 10 percent of the state budget to 20 percent, a calculation based on pension records and budget projections.

In early 2010, Caron, citing the Brookings report, said the pension debt was “a ticking time bomb that the next governor will inherit. There isn’t going to be enough money to do what we’re already committed to doing, much less doing more of what we should be doing.”

During the campaign, LePage and Cutler vowed to deal with the debt if they won; the Democratic nominee, Libby Mitchell, did not make the pension debt an issue and believed future investment returns would solve the problem — a view the Democratic-appointed head of the pension board did not endorse.

Reducing the pension debt was one of LePage’s early achievements — although he didn’t do it alone. He initiated a plan, but it was modified by the Legislature’s appropriations committee. The debt reduction came from the wallets of current and future retirees whose future pensions will be limited by a severe cutback in their cost of living provisions. (Pensioners will be eligible for cost of living increases in the future if the state has a budget surplus.)

In all the years the debt was building, the lone voice calling attention to the looming budget crisis was Republican Peter Mills, a longtime member of the Legislature.

Mills, who lost to LePage in the 2010 primary, considers the pension legislation the governor’s “single biggest achievement,” an opinion echoed by many of the those interviewed for this story.

“That dropped $1.7 billion off the pension liability,” said Mills, currently the head of the Maine Turnpike Authority. “If he had not been elected governor and the Republicans had not taken power in 2010, it’s safe to say that would not have happened.”

Caron said the pension debt “was going to bankrupt the state if we didn’t so something about it.”

LePage himself puts the pension bill second on his list of achievements — “Paying the hospital debt was the most important … that was the hardest one.”

That $183.5 million debt for underpaying Medicare bills from the hospitals had been building for at least 10 years when Democrats controlled the State House. Caron and others have said the state used the hospital’s money as a “credit card” rather than make cuts from the state budget to pay the debt.

“We were skating, spending money we didn’t have,” he said.

The state auditor, Neria Douglass, a CPA who was appointed by the Democratic Legislature, noted just last December that the hospital debt is the “largest cause” that “adversely affect(s)” the state’s balance sheet.

The legislation proposed by LePage and — after a long fight by the Democrats — approved by the Legislature is designed to take that red ink off the state’s balance sheet. It will also free up $300 million in federal matching funds – putting a total almost a half-billion dollars into the state’s economy. 

Paying for the hospital debt fixes two problems LePage inherited. One was the debt itself. The other was a decision by the Baldacci administration to fix a budget shortfall by selling the state’s liquor business at what a study showed was a low-ball price of $125 million.

LePage proposed — and the Legislature agreed — to pay for the hospital debt with the increased revenue from a renegotiated sale of the liquor business.

Democrats also tried to link paying the hospital debt to expanding Medicaid, the state-federal health care program for the poor.

LePage vetoed that bill, claiming broadening Medicaid would amount to a “massive increase in welfare expansion” and there was no guarantee the federal government would pick up the costs over the next decade.

That was a blow to not just those who would be served by the expansion, but also to the state’s economy, said Mills and others.

“There’s more money tied up in that than the hospital (debt). Over three years, the amount of money they would have gotten in the federal expansion was $930 million over three calendar years.”

Mills said one of LePage’s political heroes, Ronald Reagan — there’s a large portrait of the 40th president hanging in LePage’s office — would not have let his conservative philosophy “get in the way of some money.”

Mark Eves, the Democratic speaker of the House, said LePage’s position on Medicaid showed that often he has been “just immovable and in a very reckless way.”

LePage sees his confrontations with the Legislature differently: “The only reason we got anything done is we embarrassed some people into doing stuff. This place is a nicey-nicey club. Go-along to get-along, and then we’ll be friends … The little bit I got done is because I forced it. If I was nicey-nice, I would have got nothing done. I’d have gone to a lot of golf tournaments and cut a lot of ribbons.”

CORRECTION: The Maine Center for Public Interest Reporting incorrectly reported the name of the state auditor responsible for the state audit released Dec. 21, 2012. The auditor responsible for the report was Neria Douglass. She became state treasurer in January and was replaced by Pola Buckley. This report has been corrected. 

Continue reading Chapter 3: Friendlier toward job creators than environmentalists

Naomi Schalit contributed to this story. Disclosure: Severin Beliveau, who is quoted in this story, contributed $250 to the Center in 2013. The Maine Center for Public Interest Reporting is a nonpartisan, non-profit news service based in Hallowell. Email: [email protected] Web: www.pinetreewatchdog.org.

About the author: John Christie is the co-founder, publisher and senior reporter of the Maine Center for Public Interest Reporting. He has covered local, state and national politics as a reporter, editor and publisher at newspapers in Maine, Massachusetts and Florida and holds a BA in political science from the University of New Hampshire.


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: