October 25, 2013

Two sides of LePage: He sometimes offends, but his focus is unwavering

Maine Center for Public Interest Reporting

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Gov. Paul LePage has emerged as an anti-politician with his disdain for the sometime necessary tact required of political leaders.

Maine Center for Public Interest Reporting

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LePage is known mostly as the former general manager of Marden’s string of discount stores, but before that he was a “turn-around” specialist – the MBA you hire when your business is on the ropes, often due to too much debt, overspending and inefficiencies.

One of LePage’s oldest friends and golf buddies is Alan Rancourt, the president of Kennebec Federal Savings in Waterville, who recalled LePage’s days as an executive at the now-defunct Scott Paper plant in Winslow and as a gun-for-hire business consultant.

He said when LePage came into those jobs the first thing he did was “get the invoices … you paid the people who supplied the lumber because if you don’t pay them, then the whole process goes away.”

The “invoices” on his desk when LePage was inaugurated on Jan. 5, 2011 included $4.4 billion in debt to the pension system because the state had underpaid into the system for years and pension investments took a hit from the recession.

Unless something was done about the debt, it would soon go from eating up 10 percent of the state budget to 20 percent, a calculation based on pension records and budget projections.

In early 2010, Caron, citing the Brookings report, said the pension debt was “a ticking time bomb that the next governor will inherit. There isn’t going to be enough money to do what we’re already committed to doing, much less doing more of what we should be doing.”

During the campaign, both LePage and Cutler vowed to deal with the debt if they won; the Democratic nominee, Libby Mitchell, did not make the pension debt an issue and believed future investment returns would solve the problem – a view the Democratic-appointed head of the pension board did not endorse.

Reducing the pension debt was one of LePage’s early achievements – although he didn’t do it alone. He initiated a plan, but it was modified by the Legislature’s appropriations committee. The debt reduction came from the wallets of current and future retirees whose future pensions will be limited by a severe cutback in their cost of living provisions. (Pensioners will be eligible for cost of living increases in the future if the state has a budget surplus.)

In all the years the debt was building, the lone voice calling attention to the looming budget crisis was Republican Peter Mills, a longtime member of the Legislature.

Mills, who lost to LePage in the 2010 primary, considers the pension legislation the governor’s “single biggest achievement,” an opinion echoed by many of the those interviewed for this story.

“That dropped $1.7 billion off the pension liability,” said Mills, currently the head of the Maine Turnpike Authority. “If he had not been elected governor and the Republicans had not taken power in 2010, it’s safe to say that would not have happened.”

Caron said the pension debt “was going to bankrupt the state if we didn’t so something about it.”

LePage himself puts the pension bill second on his list of achievements – “Paying the hospital debt was the most important … that was the hardest one.”

That $183.5 million debt for underpaying Medicare bills from the hospitals had been building for at least 10 years when Democrats controlled the Statehouse. Caron and others have said the state used the hospital’s money as a “credit card” rather than make cuts from the state budget to pay the debt.

“We were skating,” he said, “spending money we didn’t have.”

The state auditor at the time, Neria Douglass, a CPA who was appointed by the Democratic Legislature, noted just last December that the hospital debt is the “largest cause” that “adversely affect(s)” the state’s balance sheet.

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