March 27, 2010

DAN BILLINGS: Legislators need to get off debt train, stop burdening Maine taxpayers

By Dan Billings

With agreement having been reached on a plan to balance the state budget, the most-discussed fiscal issue of this year's legislative session is about to be put to bed. However, yet to be resolved is an issue that will affect Maine taxpayers for years to come -- whether the state will take on additional debt.

The Maine Constitution requires approval from two-thirds of the members of both houses of the Legislature and ratification by the voters for the state to issue general obligation bonds. As a result of this process, the state of Maine currently has more than $507 million in bonded debt. Another $140 million in bonds has been approved by the voters but not yet issued.

In addition, Maine voters will consider bond questions in June and November totaling nearly $79 million. These bond questions were approved by the Legislature last year as part of a two-year bond package totaling $150 million.

But there is never enough money to satisfy Democrats at the State House. Despite hundreds of millions in existing debt, and more bonds to be considered by the voters later this year, more borrowing is being discussed. Senate President Libby Mitchell and House Speaker Hannah Pingree are promoting a bond package totaling $99 million. Gov. Baldacci, in his last year in office, has proposed saddling the next governor with an additional $79 million in debt.

With Democrat leadership solidly in favor of burdening Maine taxpayers with more debt, whether more bonds will be approved will depend upon whether a sufficient number of Republicans get on board the debt train to provide the necessary two-thirds margin for passage. So far, Republican leaders have expressed skepticism regarding more borrowing, but individual members will feel pressure to support bonds to fund projects in their area.

Though politicians promoting more debt only want to talk about general obligation bonds, voter-approved bonds are a small portion of Maine's total debt. According to data compiled by the Maine Heritage Policy Center, Maine's total debt adds up to a staggering $11.5 billion. That is nearly $9,000 for every man, woman, and child in the state.

You may wonder how Maine has more debt than the bonds approved by voters. Though the Maine Constitution strictly limits loaning Maine's credit "directly or indirectly," through the years politicians have been creative in coming up with numerous ways that debt could be incurred without voter approval. Unfortunately, Maine's courts, beneficiaries of this extraconstitutional debt, have upheld such schemes.

The most popular form of non-voter-approved debt is "moral obligation" debt, which is borrowing done by entities such as the Finance Authority of Maine and the Maine Municipal Bond Bank. Maine has $4.2 billion of such debt. More than $175 million has been borrowed through an entity known as the Government Facilities Authority ("GFA"). Other examples of non-voter-approved debt include bonds to be paid by future state revenue, bonds to be paid by future transportation funds and capital leases.

Maine also has unfunded pension obligations totaling nearly $4 billion. In addition, unfunded obligations for health care coverage for retired state employees, teachers and legislators is estimated to be more than $2.2 billion. These are bills that are certain to come due that will be paid by Maine taxpayers.

Maine's growing debt not only burdens future generations to pay for spending done by the current generation, but the cost of servicing the debt also takes up a larger and larger piece of the state budget. In Fiscal Year 2005, debt service payments for general obligation and GFA debt totaled $92 million. For the fiscal year beginning on July 1, debt payments will total more than $127 million -- an increase of more than 38 percent. This has happened at the same time that the state has faced multiple budget shortfalls measured in hundreds of millions of dollars.

The state of Maine is quickly heading down the same path as the federal government -- piling debt upon debt, with debt service becoming an ever-increasing portion of the annual budget. This trend can only be reversed if the Legislature, and the voters, do not make the situation worse by approving additional debt this year. The first step is for the Legislature not to approve a bond package this session. The second step is for the voters to defeat the bond questions on the ballot later this year. In the long term, these steps would mean much more for Maine's fiscal future than the budget talks that have dominated State House politics this year.

Dan Billings is a Republican activist and commentator. He practices law in Waterville. He can be reached at


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