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Rep. Ryan Harmon (R-Palermo)
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For Immediate Release

Date: 06/11/12

Rep. Ryan Harmon's column on legislature's final days

Bonds and budget cuts defined Legislature's final days

To the Republican Journal

News stories bombard us constantly. In the blur of this relentless onslaught, it's hard to see patterns. But let's step back for a moment and draw some connections about events during the last days of the 125th Legislature, which will go down as one of the most productive in decades.

The Legislature convened briefly for the last time on May 31, for "veto day." Governor LePage vetoed four bills, including a $20 million bond proposal for research and development, which was sustained. However, he did let four other bond bills go out to Maine voters without his signature. The largest of the four, for about $50 million, is for transportation needs. The others would raise cash for higher education, clean water projects and Land for Maine's Future.

If they are approved by the voters, the ultimate cost of those bonds, including interest, will be determined by the state's credit rating, and we received some good news on May 25, when Standard & Poor's released its latest report. Based on fiscally responsible reforms enacted by the Legislature, the state maintained its healthy AA rating. What's more, S&P also upgraded our outlook from negative to stable.

You may be familiar with some of the landmark achievements of this Legislature - the biggest tax cut in Maine history, regulatory reform, welfare reform and an overhaul of the health insurance system to move us back into the American mainstream. The S&P analysts, however, focused on something else - the remarkable reform of Maine's public pension system for teachers and state workers. Credit analyst Ken Rodgers cited that initiative as the reason for the outlook upgrade.

To be sure, the pension changes weren't popular with state workers, but Republicans leading the effort understood that the soaring costs to pay down the unfunded debt were threatening to squeeze out other vital state functions, such as schools and care for the elderly. Without reform, the state's contributions to pay off the unfunded actuarial liability (UAL) were expected to jump from $340 million this year to more than $600 million in 2018 (in future dollars). Instead, the 2018 payment is now estimated at $421 million.

Overall, the reform sliced $1.77 billion from the unfunded liability. The retirement age for new and non-vested workers rose from 62 to 65, and cost of living increases were frozen for three years and capped thereafter at 3 percent of the first $20,000.

In this budget cycle alone, those changes saved taxpayers more than $300 million and will save an estimated $200 million a year going forward. All told, taxpayers will save more than $3 billion by 2028 (in inflation-adjusted dollars), when the debt must be retired. Meanwhile, the retirement system will remain financially stable.

However, the S&P report also raised a red flag about MaineCare's perpetual cost overruns. As analyst Rodgers put it, "MaineCare continues to face operational and fiscal challenges." He made it clear that the credit rating agency expects to see Maine "tackle Medicaid-related operational and funding issues."

Apparently, he doesn't think we went far enough in recent supplemental budgets to fix MaineCare shortfalls and curtail the scope of the program. The latest cost-control effort, which passed the Legislature on May 15, was a $78.5 million budget reduction that will bring the system's enrollment closer to the national average.

No legislator likes to cut people off programs, but the fact is that Democrats built up MaineCare to a point where it cannot be sustained. During their many years in control, they could have kept the program affordable. Since 2000, however, enrollment for MaineCare and its related caseload shot up 78 percent while our population increased only 7 percent. We provide free health care for 35 percent more of the population than the national average. Billions of tax dollars flow into MaineCare every year, but it never seems to be enough.

By 2004, with costs spiraling out of control, Democrats searched madly for money to keep the program running at full tilt. They stopped paying hospitals for MaineCare services. They sold off the state liquor business and borrowed from the Highway Fund. They cut school funding, delayed provider payments into later fiscal years and forced furlough days on state workers. When the federal stimulus money arrived starting in 2009, they poured $633 million of it into MaineCare.

When the stimulus disappeared and Republicans took control, we had no choice but to make the hard decisions that Democrats refused to make. Without these difficult cuts, MaineCare would have continued to cannibalize the rest of state government.

Overall, this Legislature did the heavy lifting on pensions, health insurance, MaineCare and other problems that had been ignored for years. The state will be in much better shape going forward. ###

State Rep. Ryan Harmon (R-Palermo) serves on the Legislature's Taxation Committee.

Jay Finegan
Maine House Republicans
Tel: (207) 287-1445