May 29, 2012

Maine Voices: Downgraded bond rating reflects need to trim state spending further

Moody's believes that Maine must do more to bring DHHS costs into line with our revenue picture.

By REP. LES FOSSEL

ALNA — Far from serving as a condemnation of the budget passed May 15 by the Legislature, the recent Moody's report about Maine's credit rating reflects the serious long-term challenges that the state faces.

I took the time to read the entire Moody's report, and I am pleased that they maintained our Aa2 credit rating. This rating will make it easier to sell bonds that serve as a strategic investment in our economy.

Moody's did, however, express concerns regarding the condition of our economy and our state budget. One of their primary concerns was the tepid pace of Maine's economic recovery.

Moody's downplayed the significance of cuts to the Department of Health and Human Services as contributing to our slow economic growth. They cited our weak demographic profile -- our aging work force and young people leaving the state -- as a bigger issue affecting our economy than the cuts. These have been factors in Maine's weak economy for years and are issues that I have had concerns about long before I entered the Legislature.

When they did mention the DHHS cuts, the Moody's analysts only noted that they "... may reduce future growth prospects for that sector." It's true that the health care sector is especially robust right now; indeed, it accounts for about 25 percent of the state's economy. It should come as no surprise that another robust sector is government -- our state's largest employer. These two sectors being robust are not signs of a healthy economy, but an unbalanced one.

If the rest of our economy recovers enough -- and I believe it will, thanks in part to the pro-growth policies implemented by the Republican majority -- the impact on our health care sector from any cuts will not be felt as much.

Besides, anyone who is truly concerned about the health care industry in Maine will tell you that one of the best things we could do is pay the state's MaineCare debt to our hospitals. Republicans have done our best to reduce an enormous hospital debt left by the prior administration, but we still owe an estimated $400 million, of which Maine's share is $168 million.

The supplemental budget passed in May will direct $25 million to the hospitals from any surplus funds left at the end of fiscal year 2013. With the federal match, that would total nearly $75 million.

The impact of the DHHS cuts was not cited as a reason for the negative outlook. Instead, Moody's cited "recurring challenges on the spending side of (our) budget, primarily in the Department of Health and Human Services." In other words, they think we are still spending too much on the DHHS.

The ratings agency believes, as do I, that we still need to do more to bring our DHHS spending into line with our revenue, as well as with the national averages. If Moody's thought our taxes were too low, they would have said we had a revenue problem, not a spending problem.

Apart from overspending, another major concern of Moody's was our lack of budget reserves. Republican legislators have consistently advocated for increasing the rainy day fund for just this reason, while Democrats have raided it to apply short-term patches to long-term problems.

Our commitment to rebuilding our reserves is exactly why we modified L.D. 849 before it passed so as to ensure that it wouldn't affect the amount of money transferred to the rainy day reserve.

L.D. 849 says the state will use excess revenue to gradually reduce the top income tax rate to 4 percent, thus returning a portion of any surplus to the people who earned it -- the taxpayers. Over time, this will help our economy without hurting our ability to strengthen our reserves.

As a legislator, I must look at the entire economy, and it is clear to me that it is hampered by overspending in the Department of Health and Human Services. It has led to constant fiscal challenges, putting Augusta in permanent crisis mode. This is no way to govern.

This session, we began to put the state on a more fiscally sustainable path that will, in time, help us to build a more diverse and stable economy. We have addressed the crucial issues of jobs and economic growth from numerous angles, but our work is not yet done. This is a long-term project that will require a long-term effort.

State Rep. Les Fossel, R-Alna, serves on the Health and Human Services Committee, the Judiciary Committee and the Government Oversight Committee.

– Special to The Press Herald

 

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