LePage changes hospital bill to address Democrats’ constitutional concerns, but Goodall isn’t convinced

The State House in Augusta, as seen Monday, March 11, 2013.
The State House in Augusta, as seen Monday, March 11, 2013. Buy Photo
Posted March 12, 2013, at 5:31 p.m.
State Sen. Seth Goodall
State Sen. Seth Goodall Buy Photo

AUGUSTA, Maine — Gov. Paul LePage has proposed amending his hospital debt repayment bill in an effort to address questions Democrats have raised about whether it’s constitutional to use a state-issued revenue bond to pay off the state’s $484 million debt to its hospitals.

A key Democratic legislative leader welcomed the move but wasn’t convinced the change fully addressed constitutional concerns raised by some in his party.

The amendment from LePage charges the Maine Municipal Bond Bank, rather than the state treasurer’s office, with selling the $186 million bond that would allow the state to pay off its hospital debt by using future proceeds from a renegotiated state wholesale liquor contract. The $186 million state payment would trigger $298 million in matching payments from the federal government.

Michael Cianchette, LePage’s chief legal counsel, said the bill has been constitutional from the start, but the governor sought to put constitutional questions to rest for Democrats who have opposed the proposal in part on constitutional grounds.

“It’s being put forward to take that issue off the table in everyone’s mind, not just ours, and basically move the ball forward and get the hospitals paid,” Cianchette said Tuesday.

Democrats last week voiced concerns that LePage’s plan for paying back the state’s 39 hospitals for debt that has largely accrued since 2009 was unconstitutional. They cited a 2009 opinion from Attorney General Janet Mills in which she wrote that a proposal at the time to use a general obligation bond to pay down the state’s hospital debt, which she deemed a current expenditure, didn’t pass constitutional muster.

LePage told lawmakers on Monday during hearings on his hospital payment bill and a competing proposal from Democrats that there’s no constitutional issue with his bill and that he’s ready to vouch for it in court.

“I’m willing to ask the law court to weigh in on it,” he told members of the Legislature’s Veterans and Legal Affairs Committee. “If there is a constitutional challenge, I have no problem going to the supreme court of Maine to ask for their judgment.”

Sen. Seth Goodall of Richmond, the Democratic Senate leader, said Tuesday he welcomed the change from the governor’s office. But it doesn’t fully address Democrats’ concerns about the hospital repayment bill’s constitutionality, he said.

By issuing the bond through the state treasurer’s office, it appeared more like a general obligation bond — which is backed by the full faith and credit of the state — that would require voter approval, Goodall said.

The Maine Municipal Bond Bank, which the Legislature created in 1972 and largely sells bonds for the state’s towns and school districts, can issue a bond that’s backed by a single revenue stream, he said. In this case, that revenue stream would be future proceeds from a renegotiated state liquor contract.

“The more it looks like you’re pledging the full faith and credit of the state, that means you’d have to go out to the voters,” Goodall said. “It appears the governor’s office has taken a step in the right direction to fix that.”

Cianchette said the difference in bond issuer isn’t a meaningful one, but the governor’s office wanted to address Democrats’ constitutional concerns.

“No matter who sells [the bond], the only security is going to be the revenue from liquor sales,” he said.

But Goodall said the governor’s amendment doesn’t assuage Democrats’ concerns that, under LePage’s proposal, the state would be using a bond to pay a current expenditure. The state’s constitution prohibits using bonds to pay for “current expenditures,” and Democrats have cited the attorney general’s 2009 opinion to argue the state’s hospital debt payments are a current expenditure.

“We have to be very cautious about what we spend bonding on,” Goodall said. “We have to spend it on capital expenditures, not current expenditures.”

Cianchette said the state’s hospital Medicaid debt dates back to 2009 and, in some cases, even further. “These are long-term debts for the state,” he said. “We don’t think it’s a current expenditure.”

Tim Feeley, a spokesman for the attorney general’s office, said LePage’s amendment “addresses several of the concerns we had with the initial bill.”

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