Maine treasurer: LePage order to withhold $100 million in bonds comes after he OK’d payments to start projects
AUGUSTA, Maine — State Treasurer Neria Douglass says Republican Gov. Paul LePage’s directive this week for her to withhold issuing nearly $100 million in bonds approved by voters contradicts a previous financial order from his administration that told her to use cash on hand to start projects in anticipation of the bonds being sold in June.
The financial order in question, a copy of which Douglass provided to the Bangor Daily News, was signed by Finance Commissioner Sawin Millett. It includes the following assertion in a section titled “statement of fact:”
“This financial order provides allotment to the department and agencies, as per the attached detail listing, to allow for the obligation and expenditure during fiscal year 2013-14 of cash advances from the Treasurer’s Cash Pool for approved bond projects in lieu of issuing bond anticipation notes,” reads the order. “The Treasurer’s Cash Pool will be reimbursed from the sale of bonds in June.”
Douglass, a Democrat, said LePage’s order to withhold the bonds this week will seriously exacerbate the state’s cash-flow situation.
“I’ve tried to remind him that his administration signed the order last July, and we issued funds based on his signing of the order,” said Douglass on Friday. “I believe that I can legally move forward since he already signed the financial order, even though he hasn’t signed the actual bonds. I really need to solidify a legal opinion on that, but we intend to continue to move forward, but without advancing any further funds for now.”
In a Feb. 19 email to Douglass, LePage told her to withhold some $100 million of bonds.
“I will not approve going to market until there is $60 million in the rainy day fund,” wrote LePage to Douglass, according to a copy of the three-sentence email provided by Douglass. “I will not subject the state to further credit reduction. In the past, the treasurer would keep the governor updated on cash expenditures, you have chosen not to.”
LePage has said previously said that he would withhold up to $100 million in voter-approved bonds because of a bill passed recently by the Legislature that restores $40 million in revenue sharing to Maine towns and cities that was cut as part of the two-year budget passed by the Legislature last year. LePage proposed last year in his biennial budget bill to cut revenue sharing completely for two years, but the Legislature restored some of that funding over LePage’s objections.
Lawmakers also agreed to seek alternative revenue sources to restore the $40 million revenue-sharing cut in the budget. A task force could not agree on those measures, so Democrats on the budget-writing Appropriations Committee put forth an alternative plan.
That revenue-sharing bill, LD 1762, would take $21 million from the rainy day fund, which currently has about $60 million in it, as well as $4 million from a fund designed to accumulate budget surplus for the purpose of eventually reducing the state’s income tax and $15 million from surging unappropriated revenues. The bill, which had strong bipartisan support in the Legislature, is on LePage’s desk awaiting action. LePage initially said he would veto the bill but his administration said Friday that he intends to let it go into law without his signature.
Douglass said based on the financial order, she has already issued more than $50 million in funding from the state’s cash pool to pay for a range of projects, using money that was to be replaced by the issuance of the bonds this year. Those projects include water source development, infrastructure improvements at the former Brunswick Naval Air Station, the construction of a dental school, transportation infrastructure upgrades and land acquisition. Douglass said most of those projects were put on hold in July of 2012 because LePage previously refused to issue voter-approved bonds that date back to 2009.
LePage spokeswoman Adrienne Bennett said “the burden is on [Douglass]” to fix the problem and that circumstances have changed since Millett signed the order.
“At that time, liberal politicians weren’t raiding the budget stabilization fund,” said Bennett. “This is political maneuvering at a time when it’s convenient for liberal politicians. Democrats coordinate with Neria step by step. She has had sufficient time to put these bonds out before the Legislature made this decision [about funding part of the revenue sharing bill with part of the rainy day fund]. She waited. That burden is on her.”
The rainy day fund currently has more than $59 million in it but would plunge by $21 million as a result of the revenue-sharing bill. Bennett said Friday that despite prior statements by LePage that he will veto the bill, he now plans to let it go into law without his signature.
LePage’s directive to Douglass drew criticism from his political opponents, including his two chief opponents in his re-election bid. Independent Eliot Cutler, who nearly defeated LePage in 2010, called the impasse “crisis-to-crisis governing.”
“Gov. LePage’s refusal to issue voter-approved bonds is just the latest example of his spit-in-your-eye approach to governing,” said Cutler in a written statement. “The fact is, because of the governor’s refusal to do his job, submit a budget and issue authorized bonds, Maine will extend a sorry three-year record of failing to borrow money at some of the lowest interest rates we will ever see, money that could have been used to put people back to work rebuilding our crumbling infrastructure.”
Democrat Mike Michaud, who is also opposing LePage for the governorship, proposed an economic development proposal this week that included planning 10 years ahead for state borrowing.
“Gov. LePage is so determined to hurt towns and cities by cutting revenue sharing that he’s willing to jeopardize the economy and put jobs at risk by holding back voter-approved investments,” said Michaud in a written statement. “Maine businesses and communities deserve a state government that is predictable and honors its commitments.”
Brent Littlefield, LePage’s senior political consultant, retaliated against Michaud and Cutler by saying they don’t have their facts straight.
“It is not surprising Michael Michaud and Eliot Cutler would issue a statement without having accurate information,” said Littlefield in an email to reporters. “Michaud and Cutler seem more interested in pushing political attacks than solving the real fiscal problems facing the people of Maine.”
Legislative Democrats also lambasted LePage.
“The line has been crossed when the governor’s emotional volatility starts hurting Maine’s economy and Maine’s workers,” said Senate Majority Leader Troy Jackson, D-Allagash, who is one of LePage’s most fierce critics. “I am concerned for the businesses and projects that have started their work and now hear that the governor has changed his mind.”
Bennett said the governor is concerned about the state’s financial health.
“He is concerned about the fiscal integrity of the state,” said Bennett. “We could face a budget downgrade if any more is taken out [of the rainy day fund]. That’s a critical point. … We should have the reserve up to about $150 million, and we’re not close to that.”
Douglass said that cash reserves are a portion of the formula used to establish Maine’s credit rating.
“It is a factor in the rating agencies’ consideration of our financial worthiness but certainly not the only factor,” she said. “Others include predictability of the financial management of the state and the consistency of the financial management, among other factors.”
Millett has warned the Legislature to leave the rainy day fund alone.
“It is not sound fiscal policy to dip into the state of Maine’s savings account and further diminish our already limited financial reserves,” Millett said in a written statement earlier this month. “While $59.7 million may sound like a lot of money, it is a minimal reserve for a state that spends more than $3 billion annually. As it stands currently, the state of Maine could operate for less than a week with the current budget balance of the budget stabilization fund.”
The budget stabilization fund could come into play in the coming months if the Legislature is unable to enact a budget bill that addresses tens of millions of dollars in shortfalls in the current fiscal year, which ends June 30. LePage has vowed not to submit a supplemental budget bill — making him the first governor in recent memory to bow out of that process — and the Legislature’s Appropriations Committee is working on developing a bill.