Republican radio address: Bonds Would Make Maine's Debt Worse

For the weekend of March 6-7, 2010

Greetings, this is Josh Tardy, leader of the Republicans in the Maine House.

Most Maine residents are aware by now that state government is in serious financial trouble. Tax revenues picked up slightly in the last couple of months, but the budget still must be cut by $360 million to make sure it stays in balance over the next 16 months. That’s when a new budget will begin under a new governor and a new Legislature.

Maine isn’t the only state in bad shape. Most states are cutting way back on spending as tax revenues fall and this recession lingers on. The best we can hope for is to do the least amount of damage possible before a new team takes over management of the state. Their job will be tough enough. With the end of the stimulus money and a surging debt in the pension fund for retired teachers and state workers, the next budget may require cuts of more than $1 billion. Around the State House, the upcoming biennial budget is called the “cliff budget,” because state spending will have to be slashed so radically that it will feel like we’re dropping into an abyss. We may look back on this tight budget as the good old days.

The last thing we should be doing is making our fiscal problems even worse.

Unfortunately, the Legislature’s majority party has different ideas. Out of the blue, the top Democrats in the Senate and the House sprung a plan this week for a new bond package with a price tag of $100 million. They’re spinning it as a jobs bond, like a Maine version of the federal stimulus plan. And like the stimulus, it would amount to an artificial sugar high that creates few permanent jobs but leaves future taxpayers with an enormous new debt.

This new bond sponsored by Senate President Libby Mitchell and House Speaker Hannah Pingree appears designed to upstage another bond proposal that Governor Baldacci will introduce next week. His plan, frankly another surprise, calls for bonding about $80 million, while pushing the vast majority of the repayments onto the next governor. Bonds are not free money. They are no different than a car loan, which must be paid back – with interest. Maine already has $453 million in outstanding bonds that cost us about $100 million a year in principal and interest. More bonds, authorized by the Legislature last year, will be on the June and November ballots for voter approval or rejection.

The unexpected appearance of Senator Mitchell’s $100 million jobs bond plan is already raising eyebrows in Augusta. Democrats have controlled the Legislature for three decades, a span during which the Maine job situation has stagnated under an endless onslaught of taxes, regulations and anti-business policies promulgated by the Democratic Party. Senator Mitchell has been in office for 24 of those years. I realize she’s running for governor and all candidates are talking about job creation. But my question is whether job creation on borrowed money makes financial sense or is just gubernatorial politics.

In my opinion, candidate Mitchell’s proposal is economically irresponsible. The state budget has no money for additional debt service, so paying for this bond would come at the expense of other budget items, such as human services and local school funding. To make matters worse, Maine has already maxed out on matching federal funding for roadwork, so the highway component could not be leveraged for additional money.

We cannot afford this $100 million proposal for new bonds. Last year, the governor and his legislative leadership wanted to bond $306 million. Republicans announced early in the session that we would accept no more than $150 million, with most of it for road construction, higher education and economic development – things that pay dividends. Despite intense pressure from Democrats, Republicans held their ground, because our economic analysis showed that the state could not afford what the Democrats wanted. The final bond package was indeed $150 million. By hanging together and hanging tough, Republicans saved Maine taxpayers about $200 million, including the avoided interest costs. In fact, we saved $15 million in interest this year alone, and that was used to fill a placeholder gap in the budget.

Maine’s overall debt picture is very sobering. If you add up all the debt categories and the unfunded liabilities for retiree pensions and health insurance, we’re looking at a total state debt of nearly $14 billion. That’s about $28,000 for every Maine household. At a time when Maine families and small businesses are fighting to stay afloat, we cannot allow Senator Mitchell and the majority party to bury us deeper under an ever-increasing mountain of debt. It’s time for Augusta to get real.

This is Josh Tardy. Thank you very much for listening.