Testimony on LD 1153 “An Act To Regulate the Bonded Indebtedness of the State”

MECEP opposes LD 1153 because we believe strongly that it will be bad for the economy of Maine, by increasing costs and delays for prudent borrowing for many projects that can grow jobs. Over 100,000 Maine people remain underemployed and unemployed in the worst recession in our lifetimes. While Maine‟s March unemployment rate of 7.6% remains better than the national average rate for April of 9%, we cannot afford legislation that weakens the Maine economy.

Last fall Maine voters approved the most recent of a series of bonds authorized by over two-thirds of the Legislature for a variety of worthy investments. There are close to $100 million in authorized but unissued bonds outstanding. Normally, in May each year, the State Treasurer and other state officials would be making presentations to the rating agencies to demonstrate that Maine has again taken all necessary steps to maintain our excellent past ratings. In June customarily the Treasurer has aggregated the cash needs of projects in progress and issued bonds to finance them over ten years.

In the past we have all heard State Treasurers taking pride in describing Maine‟s fiscal position as the rating agencies themselves have described it: “Maine continues its conservative approach to debt, with an aggressive payout structure and capacity to accommodate unforeseen borrowing needs.” (Moody‟s, July 2010). Standard and Poor‟s in May 2010 also noted Maine‟s “favorable debt position with a low debt burden and rapid amortization of debt outstanding.”

However, the current State Treasurer has, in the words of a March 23 Bangor Daily News editorial, made “claims about looming state pension shortfalls and outstanding state bond repayments (that) approach hyperbolic „sky is falling‟ tones.” The Portland Press Herald said “(The Treasurer)… is both confusing and oversimplifying a complex issue – the state‟s indebtedness – and perhaps sending an inaccurate message about the conditions of Maine‟s finances….Alarmist language won‟t solve anything.” We agree.

Now the Treasurer seeks to insert his office into the way that several quasi- independent agencies have issued bonds for many years, 40 years in the case of the Maine State Housing Authority. The independent agencies‟ prudent practices have earned excellent ratings for all of them, have raised capital for billions of dollars of construction and other investments over the past many years, and provided the public with many necessary and cost-effective public buildings used every day.

This committee has a lot of difficult choices ahead, but this bill is not one of them. I hope you can quickly reject this proposal and get back to the serious challenges of balancing the state‟s budget as you have so many times before. The majority of this legislature should retain the power to decide how tax exempt bond authority from the US Treasury can best be allocated to maintain Maine‟s outstanding use of prudent borrowing to invest in public purposes. The changes proposed in this bill would do nothing to improve upon that outstanding record. 

Christopher St. John, MECEP Executive Director, speaking before the Joint Standing Committee on Appropriations and Financial Affairs in opposition to LD 1153.