Less Borrowing, More Budgeting

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Dear Friend,

My first 2-year term as State Treasurer ends in January.  I hope 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, and click here to sign-up to receive them.  Call Treasury at 624-7477 to schedule a time for me to speak to your group about Maine’s fiscal issues.  

During the summer, there was a lively public discussion about how Maine state government borrows money.  Historically, each year the governor and legislature would lead a mostly political debate as to how much money to borrow.  Voters were then asked to approve that amount at the ballot box.

During the past decade, on average $93 million per year has been borrowed by selling bonds to investors.  Today, there is $472 million of outstanding Maine General Obligation bonds (debt) held by investors around the world.  Treasury directs enough state taxes, fees, and other revenues to pay the interest on those loans from the bondholders who purchased our securities.  When the term of the loans (bonds) expire, Treasury repays the bondholders the original (principal) amount of money loaned to Maine state government.

Below are the annual debt service payments (interest + principal) required to be made by Maine taxpayers over the next five years:


FISCAL YEAR

       INTEREST      +       PRINCIPAL     =          TOTAL

2013

        $18,076,400

$102,330,000

 $120,406,400

2014

  14,703,857

83,480,000

  98,183,857

2015

11,886,492

69,650,000

  81,536,492

2016

  9,411,404

  54,340,000

  63,751,404

2017

 7,101,545

  49,105,000

 56,206,545

 

The LePage Administration is employing a new strategy when borrowing money on behalf of the hard-working people of Maine.  First, we are removing politics from the borrowing process.  Treasury is facilitating the development of a statewide Infrastructure Improvement Plan.  This blueprint will prioritize and price the roads, bridges, ports, prisons, broadband, and other critical infrastructure needed to help attract business investment and jobs to Maine.  The Plan will aid the Governor and Legislature in directing borrowed money to fund those targeted infrastructure projects that improve the State’s business climate.

Second, state government leadership will support an amount of borrowing that Maine taxpayers can afford.  We continue to struggle to pay health care benefits for 350,000 Medicaid (Mainecare) recipients, 27% of our entire population.  We are funding a $2.5 billion shortfall in pension benefits for teachers and state employees, and another $2.4 billion liability in health care benefits for the same groups.  It’s financially unhealthy to borrow more money, spend it, and then owe the interest and principal payments on the new debt while still having trouble paying our bills.  The LePage Administration will budget as many expenditures as possible rather than borrow and spend.

Third, Governor LePage reserves the authority to determine when it’s prudent to borrow more money on behalf of the taxpayers.  The Governor will sign the final documentation required to borrow money by selling bonds, and will direct the State Treasurer to do the same, when state government programs are right-sized and spending is under control.  Future borrowing authorized by the legislature and approved by the voters will be honored when our fiscal house is in order.  This new process applies to $40 million authorized from past years and waiting to be borrowed, and an additional $76 million that voters will consider approving this November.

Washington has demonstrated how excessive government borrowing and spending hurts American families and the businesses that employ them.  This is the fourth consecutive year that career politicians have spent $1+ trillion more than collected from us in federal taxes/fees.  Washington makes up the difference by either borrowing the money (by selling bonds) or, worse, by printing it.  Many years of recklessly spending more than we take in has resulted in a frightening $16 trillion mountain of debt.  Every man, woman, and child in America now owes roughly $50,000 of debt primarily to those who purchased our U.S government bonds.  This money MUST be repaid.

Entrepreneurs look at this national nightmare and hesitate to risk their capital to expand their businesses and hire more workers.  They’re not confident that Washington politicians have the courage to tame this growing fiscal monster.  They expect higher taxes to pay for the surging debt.  Now, toss in high energy and health insurance costs, and smothering regulations. It’s no wonder that 23 million fellow Americans cannot find work or are underemployed.

Back here in Maine, we understand that state government is too big, too expensive, and too complicated.  However, the LePage Administration and legislative leaders are leading the charge to spend less, tax less, borrow less, and regulate less.  Companies are attracted to fiscally disciplined states with smaller governments that pay their bills and live within their means.  Already, research and media groups are beginning to recognize Maine’s progress in improving our business climate.  The recent CNBC report “America’s Top States for Business 2012 elevated Maine’s ranking to #35 this year from #40 last year.

We have a long way to go to further reduce the cost and complexity of operating a business in Maine.  However, for the first time in 30 years, Maine is clearly moving in the right direction.  The end result will be more and better jobs, and more prosperity for our fellow Mainers.  Our children will have more opportunities to live and raise their own families here in Maine.  And, the increased tax revenues from a growing economic pie will enable us to care for the most vulnerable among us, better educate the next generation of Mainers, and rebuild our roads and bridges.

Change is difficult.  But out-of-control spending and endless debt are destructive.  Maine knows the right path to a brighter future.  Let’s do the right thing and keep pushing forward.


Best wishes,

Bruce Poliquin
Maine State Treasurer

(Mr. Poliquin's comments are as State Treasurer, not as a Trustee of the Maine Public Employees Retirement System.)


For related information and media, visit www.maine.gov/treasurer/outreach.