Wednesday, April 16, 2014
By Karl W. Turner
CUMBERLAND – A half-century ago, as my friend and former legislative colleague, David Tobin of Windham, pointed out, legislators went to Augusta focused on two things – roads and schools. They did this for the simple reason that they believed it maximized Maine's chances for enhancing our future economic success.
Maine “should be able to issue close to $100 million of new bonds” for capital projects without affecting out-year budgets, the writer says.
2008 File Photo/John Patriquin
ABOUT THE AUTHOR
Karl W. Turner, a Republican former state senator and member of the Appropriations Committee, is a resident of Cumberland.
In the ensuing decades, Maine reached out to its people and crafted an evolving social contract with them. The state had plenty of company, starting with the federal entitlements of the mid-'60s. Led by President Lyndon B. Johnson, the United States of America set out to prove that, contrary to economic theory of the day, you could make both guns and butter at the same time.
Today, the United States and the European democracies find themselves trapped in a cycle of overpromised benefits and not enough people working to pay the bill. As former U.S. Sen. Phil Gramm of Texas said, "We have too many people riding in the wagon and not enough people pulling the wagon."
Maine finds itself in this same predicament. It has promised too much and does not have the capacity to deliver on those promises. Furthermore, its rich Uncle Sam in Washington can no longer backstop and bail out the state.
Governments, ours included, can take care of their poor and downtrodden properly only when they operate from a position of financial strength. If you look at state expenditures over the last 30 years, money spent on social services has grown dramatically, while spending on higher education and infrastructure has both flattened and regressed.
Maine's legislators and the governor, regardless of party, want to be able to care for our most vulnerable people. All of them understand that we are overextended and that our capacity to support those needing assistance is limited. The partisan differences are about where the line for support must be drawn, not whether the line should be drawn.
Gov. LePage is essentially right when he tries to push to the national average for Medicaid support. While he doesn't necessarily get points for style, his message is the same as that of nearly every other governor in the country.
Getting control of spending and living within our means is a message that will be reverberating for years to come. Many of us wondered how the European democracies were able to provide so many benefits for their people. We now understand that they were paying for it by floating debt.
While the level of austerity asked for varies from government to government and program to program, both in Europe and here at home, it can and should be coupled by selective new debt of a capital nature.
Fifty years ago, we focused on roads and schools. Now, the capital spending focus needs to be on research and development; transportation, communications and energy infrastructure; and education infrastructure. Some of these projects are or will be privately funded, while others require government funding.
Capital projects, properly selected and funded, are the lifeblood of a strong economy. They create temporary jobs while the projects are being built, with the money circulating through the economy several times.
Once the projects are completed, you are left with new research programs; physical highway, wireless or pipeline networks; and educational offerings all focused on relevant economic opportunities for Maine.
Maine has a long history of prudently using general obligation debt. Given the size of this debt (about $500 million) and the amortization period we use (10 years) and the record low interest rates of the current underwriting environment, we should be able to issue close to $100 million of new bonds. This can be done without putting additional pressure on our out-year budgets.
The Legislature's Appropriations Committee has waded through some number of bond requests from their colleagues. While all are important to their sponsors, it remains to be seen how tightly focused their proceeds are on Maine's economy. It is now time for Maine's executive to offer his suggestions for needed capital projects to help our economy grow and to push for passage of his package.
– Special to the Telegram