June 24, 2018
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Borrowing to Invest

As lawmakers consider a bond package, they must consider what level of borrowing is within the state’s means and where best to target the money for the largest economic return. Beyond these usual considerations, this year they also should think about where additional state investments will best mesh with federal stimulus funding. In some cases, that may mean investing in areas that weren’t included in the stimulus plan. In others it may mean building on work that will be done with federal money.

Although there is a natural reaction to retrench in difficult economic times, this is a good time for the state to borrow to invest in research and development, infrastructure and other projects. Investing in such projects now sends the important message that Maine plans to be active in creating jobs and reducing energy costs rather than retrenching and hoping the economic storm passes.

Interest rates and raw material prices also are lower than a few years ago, making this a good time to borrow and invest. In addition, Maine has the capacity to borrow a meaningful amount over the next couple years.

A $306 million bond package unveiled by Gov. John Baldacci in March includes nearly $128 million for transportation projects, $67.5 million for research and development and redevelopment of Brunswick Naval Air Station, and $43 million for the Land for Maine’s Future program and clean water and environmental protection.

It also includes $52 million for the state’s universities, community colleges and Maine Maritime Academy for building improvements and energy conservation projects. Reducing campus energy use lowers a major cost, helping them adjust to lower state appropriations in the short-term and perhaps freeing money for other purposes in the long run.

Another $15.5 million would be devoted to energy conservation and the development of offshore wind power in the package, which would go to voters for approval in stages.

Thankfully, Republican leaders appear committed to a bond package, although considerably smaller than the governor’s. As lawmakers debate how much Maine should borrow — and when — they must be guided by the core reason for the debt: creating jobs and growing the economy.

“We believe bonds should be targeted with precision to stimulate job creation, improve Maine’s competitiveness and produce long-term infrastructure gains that will benefit Maine people for years to come,” Republican legislative leaders Sen. Kevin Raye and Rep. Josh Tardy said in a March press release.

These are the right targets, but a bond package also must be large enough to make significant investments. Committing small amounts of money to a variety of projects is less effective than making strategic investments in areas with a proven return. Competitive research and development, transportation infrastructure and energy projects meet this standard.

By targeting funds to areas that build on the money Maine is expected to get from the federal stimulus package and focusing on job creation, lawmakers can craft a strong bond package.

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