Maine 2005 Debt Summary

Maine's 2005 Tax-Supported Debt Profile as of June 30, 2005

David G. Lemoine, State Treasurer

Tax-Supported Debt Vehicle Description Principal Outstanding 6/30/05
General Obligation Bonds (GO's) Secured by state's full faith, credit, and taxing power.
$486.94 million
Authorized but Unissued GO Bonds Bonds authorized by voters, but not yet borrowed upon.
$71.55 million
Certificates of Participation (COP's) Secured by state-issued lease payments.
$23.24 million
Maine Government Facilities Authority (MGFA) Secured by the tax supported agency budgets.
$189.57 million
TOTAL
$771.3 million

The "5% Rule" on GO Bonds: This "rule," in place since 1999, says that no more than 5% of annual general fund revenues may be allocated to debt service payments. Although labeled as a "rule," the 5% standard is in fact a changeable benchmark. State bonding can expand to any amount agreed upon by 2/3 of both House and Senate and approved by the Governor and the voters. For many years Maine bonded under a 7% rule and later under a "90% rule" which allowed no more than 90% of retiring debt to be rolled over to new bonds.

Maximum 5% Rule Bond Size: The ceiling for new GO bonds under a 5% rule is between $255 and $370 million. This range reflects varying assumptions such as spending rates, interest rates, revenue forecasts, bond ratings, amortization structures and other variables. The 2005 borrowing package is enlarged when spending is assumed to take place in 2008 - 2010 rather than 2006 - 2008. The chart below shows how Maine's rapid amortization schedule quickly opens up additional borrowing capacity under the 5% ceiling.

Amortization of Existing Tax-Supported Debt Shown in Dollars and as a Percentage of Revenues (5% rule) as of June 30, 2005

* Does not include approximately $90.58 million of FAME and the Maine Municipal Bond Bank tax-supported debt that is fully backed by reserves.

The chart entitled, "Amortization of Existing Tax-Supported Debt Shown in Dollars and as a Percentage of Revenues (5% rule) as of June 30, 2005" shows how Maine?s tax-supported debt declines at a rapid pace due to an aggressive amortization schedule.

Debt Burden and Bond Ratings: Maine's net tax-supported debt per capita is considered "low" at $487.00. The national average is $724.00 Maine's net tax-supported debt as a percentage of personal income is "low" at 1.7%. The national average is 2.4%. Maine's tax-supported debt burden is "moderate" when our UAL is included. Current bond ratings are: Moody's (Aa3) / Fitch (AA) / S&P (AA-)

Other State Debt Description Outstanding
Principal 6/30/05
Moral Obligation Bonds ( MSHA, MMBB, MHHEFA, FAME, MELA.) Bonds backed by the State's moral (but not legally enforceable) guarantee of payment. $ 3.47 billion
Unfunded Actuarial Liability (UAL) Retirement System coverage for state employees and teachers. Must be paid up by 2028. $ 2.99 billion

Short-Term Debt

Tax Anticipation Notes (TANs) and Bond Anticipation Notes (BANs) are debts are covered by general tax revenues and are paid within the fiscal year in which they are made. These debts are not considered bonded debt because they are paid off in the year in which they are issued.

Tax Anticipation Notes: Tax anticipation notes (TANs) are issued to support a State's cash flow. These short-term notes mature in the same fiscal year in which they are issued and are repaid with tax revenues. In July 2005, the State of Maine issued $123 million of Tax Anticipation Notes that will mature on June 30, 2006. The $123 million was deposited in the State's General Fund to support operations during the fiscal year. The funds earn interest for the General Fund, and this interest is used within allowable federal guidelines to offset the cost of borrowing.

Recent Tax Anticipation Notes
Fiscal Year   Note Amount
FY03 8/6/02 $250 million
FY04 7/1/03 $275 million
FY05 7/1/04 $190 million
FY06 7/1/05 $123.625 million (+ premiums to bring total proceeds to $125 million)

Bond Anticipation Notes: Bond Anticipation Notes (BANs) are short-term notes used to fund projects authorized by voters. Once approved by the voters, the bonds become formally authorized and may be drawn upon by the project's managing entity, agency or department. The managers are then asked by the State Treasurer to make quarterly requests as needed for the bond funds. These requests are aggregated by the State Treasurer and a short term bond anticipation note (BAN) is issued to raise the necessary funds. Borrowing on this "as needed" basis delays debt and reduces debt service costs. At the end of each fiscal year, the State Treasurer issues bonds to pay off the accumulated BAN debt.