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My current 2-year term as State Treasurer ends in six months. In December, I hope to be re-elected by the new Maine Legislature and to have the opportunity to serve the people of Maine for another two years. In the meantime, my Treasury work will include several initiatives dealing with government spending, borrowing and debt, and their impact on our state economy and jobs. I’ll also continue to keep you informed as to how Maine state government spends your hard-earned tax dollars. Please share my Treasurer’s Blog with family, friends, and co-workers. Call Michelle at 624-7477 to schedule a time for me to speak to your group about Maine’s fiscal issues.
New leadership at the Maine Turnpike Authority (MTA) is making steady progress in restoring taxpayer confidence in that important institution. After stealing from Maine taxpayers for decades, the former long-time executive director is serving a 3.5-year jail sentence. Increased usage of E-ZPass technology is reducing labor costs. Recycled asphalt, steel, and other materials are saving millions of construction dollars.
Even with that progress, Turnpike users may soon be required to pay an overall 21% increase in tolls. Current toll collections are able to pay the annual operating expenses, but not also the interest and principal (“debt service”) owed on a $452 million pile of debt. Adding to the problem, Turnpike traffic is projected to grow by 1.25% per year instead of the previously expected 3%, further limiting toll revenues.
The MTA was created in 1947 as a quasi-independent state Authority. It operates outside of Maine state government although each of the seven board members is appointed by the governor for a seven-year term. The Turnpike annually collects $101 million of tolls and employs 400 workers to maintain 109 miles of highway, ramps, and bridges from Kittery to Augusta. The Maine Turnpike is our major transportation artery to move people and goods to, from, and within the State. In many ways, it’s our economic bloodline.
In 1982, the Maine Turnpike Authority paid off the last of its original debt borrowed to construct the roadway. Beginning in the mid-1990s, the aging bridges south of Portland were replaced, and the 37 miles between York and South Portland were widened to three lanes in each direction. Bonds were sold to investors to borrow the funds needed for those and other projects. Today, the MTA is burdened with $452 million of debt, the last of which is due to be paid off in 2042.
From 2010-18, the debt service payments will accelerate from $26 to $40 million per year. Much of the borrowing was structured such that mostly interest was paid during the early years of the loans, presumably to keep the tolls down at the time. Now, the borrowed principal must be repaid to the bondholders in addition to the annual interest payments. Toll increases in 1999, 2005, and 2009 were not enough to pay for the Pike’s current operating expenses AND for the spiking debt service payments on the $452 million of debt. Hence, Turnpike travelers may soon be saddled with another 21% toll increase to make ends meet.
Maine and our nation must continuously maintain and improve our vital infrastructure. Our roads, bridges, seaports, rails, airports, and the like are critically necessary to support a healthy private sector economy and the jobs it creates. Those jobs lead to more prosperity for our citizens, and generate the tax revenues needed to fund public education, assistance for the most vulnerable among us, and so on. However, as seen at the Maine Turnpike, paying for this infrastructure is no easy task.
The former MTA leadership did not always honestly and wisely spend/invest toll revenues. Keeping expenses low and setting aside money each year could have built financial reserves to help fund future capital improvements. Better financial management might have avoided borrowing heavily, and now asking Turnpike users to wrestle with ballooning debt service payments.
Governments in Europe, Washington, and Augusta have demonstrated how dangerously high levels of public debt hurt us all. In Greece, civil unrest is pushing back against a government desperately trying to unwind behemoth cradle-to-grave entitlements that it can no longer afford. In the United States, Washington career politicians have spent more than collected from us in tax revenues for many years. They have recklessly grown a frightening $16 trillion mountain of debt that is causing businesses to hesitate to invest, expand, and hire more workers. In Maine, we’re facing a possible 21% increase in MTA tolls to help pay off a surge in borrowing during the past two decades.
The leadership team in Maine state government understands the danger of too much spending, taxing, borrowing, and debt. Last year, we eliminated $1.7 billion of public pension debt which cut future government spending by approximately $200 million per year. The largest tax cut in Maine history followed. This year, the Administration has been working with the Legislature to right-size our unaffordable Medicaid program which is crowding out funding for other vital services and increasing the debt owed to hospitals. Whenever possible, we’re paying our bills with current tax revenues instead of borrowing. We’re living within our means and spending only what we take in.
This fiscal discipline will bear fruit. A smaller, less expensive, and less intrusive government will help attract business investment and more private sector jobs. The resulting increase in tax revenues will allow us to better care for our most vulnerable families, and to pave our roads and repair our bridges. This is the more responsible and compassionate path to greater prosperity and opportunity for all Mainers. Let’s continue down this road.
Maine State Treasurer
(Mr. Poliquin's comments are as State Treasurer, not as a Trustee of the Maine Public Employees Retirement System.)
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