AUGUSTA – If most of us won a small lottery and received monthly payments over 10 years, we would not simply spend that money on dinner out and fancy new cars. We would do something smart with it, such as pay off the home mortgage early or invest for retirement.
In other words, we would try to do something fiscally responsible.
The state of Maine is faced with a similar choice. We are fortunate to have the opportunity to realize an extra $30 million or so per year, because our current contract on the state’s liquor business is expiring next year. We have seen how much money the state has missed out on since it sold 10 years of that revenue stream to a private business so that we could patch up a budget shortfall in 2004.
The next few months will determine whether we take the fiscally responsible course or squander this state asset once again.
The governor has proposed that we use the liquor revenue stream to issue a revenue bond — a bond that does not hurt the state’s credit rating and whose revenue source can’t be spent by the Legislature — to pay $180 million of the state’s Medicaid debt to Maine hospitals at once, triggering roughly $300 million in federal matching funds to pay the rest of the debt.
This approach has several benefits:
• First, it secures those federal matching funds, which are dwindling every year.
In 2010, the feds matched 75 cents on the dollar; today, they match 63. The longer we wait to pay this debt or any part of it, the more we pay in the long run.
• Second, it boosts our economy and creates jobs. Paying off our hospital debt would inject almost $500 million into some of Maine’s largest providers of good jobs.
Hospitals have been laying off employees, freezing wages and benefits, delaying construction projects and equipment upgrades and, in one case, even closing down a maternity ward because of these unpaid bills.
• Third, it protects our credit. If we issue any more general obligation bonds before paying off the hospital debt, we face a credit downgrade.
There is currently a voter-approved, $100 million transportation infrastructure bond waiting to be issued. We can issue this bond and create untold construction jobs while repairing our crumbling infrastructure and saving taxpayers millions by preserving our good credit, but only if we retire the hospital debt first.
In short, the governor’s plan pays off a major state debt, leverages valuable federal matching dollars, creates jobs and preserves our credit rating. It also simply does the right thing by paying our bills.
The alternative is to let the liquor revenue go into the state’s General Fund.
If there’s one thing I’ve learned serving on the Legislature’s budget-writing committee, it’s that state government has an insatiable thirst for revenue.
The Department of Health and Human Services, Maine’s welfare agency, has almost doubled its spending over the past 10 years. It now consumes almost half the budget and has given us a $400 million cost overrun, accounting for most of the total budget shortfall for the current two-year budget cycle.
The extra $30 million per year we’ll likely see from the state’s liquor business could easily be eaten up by the DHHS without any real benefit to state finances, job creation or economic growth in our state.
Also, as the Lewiston Sun Journal’s editorial board pointed out recently, Maine’s hospitals would likely never end up getting paid what they’re owed.
My Republican colleagues on the Appropriations Committee and I believe that using the state’s liquor revenue to pay our debt to hospitals — some of it owed since 2009 – is not only fiscally responsible, but also bold, productive and the smart thing to do. It’s about paying our bills and creating jobs.
State Rep. Kathleen Chase, R-Wells, is the ranking House Republican on the Maine Legislature’s Appropriations Committee.