LePage on bonds: Not never, just not now

At first read, Gov. Paul LePage’s recent revelation that he will not approve the sale of $40 million in bonds already authorized by voters seems shocking.

These are borrowing proposals approved by two-thirds of the Legislature and by voters at the polls. Among other projects, they would fund health and dental clinic upgrades, port improvements in Eastport and Searsport, airport upgrades in Augusta and redevelopment at the Brunswick Naval Air Station.

Debt service has already been accounted for in the state’s budget, and the state has the bonding capacity. Interest rates are low. The projects would leverage federal and private funding. It seems bizarre that a governor would shut down the investment, which has the ability to spur more growth.

But, it’s important to note, LePage never said he would prevent the bonds from being issued at all. And that’s where it gets interesting. Bonds expire five years after voters authorize them at the polls, and LePage’s spokesperson said he will not let them lapse. Instead, he is controlling the timing of when he will allow the state treasurer’s office to sell them at market. In his letter to state agencies sent Tuesday, he said the earliest it may be prudent to issue new bonds is in January 2014.

Looking beyond the first impression, then, we come to something more nuanced: He’s not saying no; he’s saying not now. And he’s leaving it up to agencies to prove to him why they need the money — therefore not shutting the door completely.

In his letter, LePage explained the state is spending $100 million per year through 2013 on debt service from already-issued bonds. That does not include money owed to hospitals or the Maine Government Facilities Authority. He said it would be fiscally irresponsible to add more debt until spending is under control. One measure of “under control” means not having multiple supplemental budgets.

We agree that devoting less from the state budget for debt service payments is a good idea and that fiscal prudence is important. As Mainers now know, when they go to the polls to make their decision about bonds, they are not voting about whether to borrow immediately. They are voting on whether to give permission to the governor to sell bonds when he deems appropriate. LePage has steered the conversation in an important direction: about how to cut the state’s debt.

Let us be clear, however. Though we understand what the governor is doing, we would rather see the bonds issued sooner than later. At the very least, he should emphasize that they will be issued, and he should specify a timeline. Agencies and businesses need to have certainty that their projects are not in permanent jeopardy. The governor has left many people scrambling to figure out how they will complete the work for which they have been planning.

LePage should continue to explain what their options are and help them through the process. If agencies make strong cases for how the money is needed in order to prompt greater investment, he should be open to negotiation. One possibility is that some projects, if approved, may be paid for with an advance from the state treasurer’s cash pool (as long as there’s a plan to eventually issue bonds to pay the cash pool back). We know the governor is not dead set against borrowing when considering that he recently signed a financial order allowing a bond sale.

The situation is an important one that deserves more discussion, and agencies are still determining how the governor’s announcement will affect them. We know that bonds are not always sold quickly after they’re authorized by voters; so in that way this situation is not new. But we hope the governor will make good use of future discussions with affected agencies, not use his negotiating power for political advantage, and be able to see when the projects are justified.