LePage’s plan to pay off hospital debt is constitutional, attorney general rules

Posted April 09, 2013, at 6:40 p.m.
Janet Mills
John Clarke Russ | BDN
Janet Mills Buy Photo

AUGUSTA, Maine — Maine’s attorney general signaled Tuesday that Gov. Paul LePage’s proposal to pay back the state’s $484 million hospital debt using a revenue bond backed by future liquor sales could stand up to constitutional scrutiny in court.

Attorney General Janet Mills’ signoff on the bill’s constitutionality addresses one of the remaining concerns voiced by Democrats about the hospital debt payoff portion of LePage’s bill, which proposes using future proceeds from a renegotiated state wholesale liquor contract to pay down Maine’s outstanding debt to its 39 hospitals.

Democrats indicated they were warming to the revenue bond idea Monday after the release of a nonpartisan legislative office’s analysis that projected the state could realize more than $32 million in additional revenue from its wholesale liquor business over the next decade by relying on a revenue bond to pay back the state’s hospitals, rather than demanding an upfront payment from the vendor chosen to run the state’s wholesale liquor business.

Also on Tuesday, the executive director of the Maine Municipal Bond Bank told lawmakers his organization could issue a revenue bond about 12 weeks after the hospital debt payoff bill takes effect. The bond bank wouldn’t have to wait on the state to find a new private vendor to operate the state’s wholesale liquor business, Michael Goodwin told members of the Appropriations Committee. That could accelerate the timeline for paying off the debt.

Democratic legislative leaders first questioned publicly in early March whether issuing a revenue bond to pay an outstanding debt would violate Maine’s constitution, which doesn’t allow the state to issue bonds to fund “current expenditures” and doesn’t allow the state to issue more than $2 million in general obligation debt without securing approval from voters at a referendum.

Democratic leaders based their alternative plan to pay the state’s hospital debt, which would rely on an upfront payment from the vendor chosen to operate the wholesale liquor business, in part on those constitutional concerns.

The concerns were based largely on a 2009 opinion from 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 addressed those constitutional concerns in part in March by amending his bill to charge the Maine Municipal Bond Bank, rather than the state treasurer’s office, with issuing the revenue bond. That moved the revenue bond away from the “general obligation” bond category, which would have required a referendum to approve the bond.

And Mills’ memo on Tuesday speaks to Democrats’ concerns about using a revenue bond to pay a current expenditure.

“Although this legislation raises novel legal issues that, to our knowledge, have not been litigated previously, I believe the bill in its revised form is defensible against a constitutional challenge,” Mills wrote of LePage’s bill in a letter to the chairmen of the Appropriations Committee.

The Legislature’s Veterans and Legal Affairs Committee is at work crafting a new bill to determine a path forward for the state’s wholesale liquor business. The current lease contract with Maine Beverage Co. expires in 2014. Meanwhile, the Veterans and Legal Affairs Committee has charged Appropriations Committee members with determining a payoff plan for the state’s hospital debt.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business