AUGUSTA, Maine — Consensus is emerging around two key elements of Gov. Paul LePage’s plan to repay Maine’s $484 million debt to its hospitals: the structure of the wholesale liquor contract LePage hopes will fund the debt paydown and the use of a revenue bond to pay back Maine’s 39 hospitals by the fall.
Still, agreement on the hospital debt package as a whole is elusive as Democratic legislative leaders push to tie an expansion of the state’s Medicaid program in with the hospital debt payback and LePage and Republicans resist the move.
The legislative committee initially charged with handling the hospital debt bill, the Veterans and Legal Affairs Committee, is near agreement on how to structure a renewed wholesale state liquor contract, the panel’s Democratic Senate chairman and Republican senator said in separate interviews.
And the Senate chairman, John Tuttle of Sanford, said he doesn’t agree with the move by his party’s leaders to include an expansion of Medicaid in the final package.
“Medicaid expansion, I think, should be a separate issue,” Tuttle said. “I think that we have to take care of the hospitals and take care of the liquor contract and then go to these other issues.”
The tussle over paying back Maine’s $484 million hospital debt stretches to the start of the legislative session in January, when LePage unveiled his plan to repay the debt with a revenue bond backed by increased revenues from a renegotiated wholesale liquor contract.
Democratic legislative leaders made their own pitch for using liquor revenues to pay back Maine’s hospitals when they unveiled an alternative package in mid-March that relied on using an upfront payment from the winning liquor contractor to pay back the debt.
The Veterans and Legal Affairs Committee later decided to craft its own legislation, incorporating elements from both proposals.
“This is the way that we all agreed to do it, and now the leadership has moved the goalposts,” said Sen. Garrett Mason of Lisbon, the Republican senator on the Veterans and Legal Affairs Committee. “There is no appetite on the Republican side for the expansion of Medicaid, not as a mix of this.”
House Speaker Mark Eves, D-North Berwick, said in a recent interview that incorporating Medicaid expansion, which is part of the federal Affordable Care Act, into the debt payback “addresses one of the cost drivers in our health care system, which is charity care.
“The hospitals want Medicaid expansion, and they know it would address a cost driver within their system,” he said. “We really feel it’s the responsible thing to do.”
Tuttle and Mason said their committee has agreed it won’t pursue an upfront payment from vendors vying to operate the state’s wholesale liquor business.
“We thought it would discourage people from bidding,” Tuttle said. “The more people that bid, the better it is for the state.”
Plus, a recent analysis by the Legislature’s nonpartisan Office of Fiscal and Program Review found the state would forgo more than $30 million in revenue over the course of the 10-year contract if it demanded vendors make an upfront payment. The analysis projects the state could borrow money at a lower cost through a revenue bond while investors supplying a private company with upfront capital would likely demand a higher return.
Lawmakers from both parties have said that using a revenue bond to pay back the hospitals offers the state a better deal than an upfront payment, and Attorney General Janet Mills has said that approach passes constitutional muster, putting to rest previous concerns raised by Democrats.
Mason said Veterans and Legal Affairs Committee members also have agreed to endorse an element of LePage’s plan aimed at recapturing a portion of more than $30 million in liquor sales Maine loses annually to neighboring New Hampshire. LePage’s plan centers on making Maine’s retail spirit prices more competitive with New Hampshire’s, where the same products generally sell for less than they do in Maine.
For example, a 1.75-liter bottle of Allen’s Coffee Brandy, the top selling liquor in Maine, costs $19.99 in Maine this month while it costs $13.99 a bottle at New Hampshire’s state liquor outlet, according to current price lists from both states.
Maine is one of 17 states that controls the distribution of hard liquor within its borders. The state’s Bureau of Alcoholic Beverages and Lottery Operations sets liquor prices and is the only entity allowed to bring hard liquor into the state for sale.
Tuttle and Mason said the Veterans and Legal Affairs Committee has yet to make a firm decision on whether it favors leasing the business to the winning vendor and negotiating regular profit-sharing payments for the state, as Democratic leaders proposed in their plan, or using the fee-for-service model proposed in LePage’s plan in which the state would pay a set amount for the winning vendor to operate the wholesale liquor business.
“The Veterans and Legal Affairs Committee has worked really well together, and we are 95 percent there,” said Mason. “We are feeling pretty good about where we are on the liquor contract.”