Lawmakers and voters should reject new borrowing
Earlier this week, Governor Janet Mills issued a proclamation calling the Maine Legislature back to Augusta for a special session to consider her bond proposals. The four bond bills total $163 million and would pay for “transportation, infrastructure and economic development, environmental protection, and land conservation.”
While the legislature should have included these items in the nearly $8 billion biennial budget passed in June, this isn’t the only reason why new borrowing at this time would be irresponsible.
The purpose of a general obligation bond is to pay for long-term projects that generations of Mainers will be able to enjoy. While bonds are sometimes necessary, there are instances when the legislature and the people of Maine should undoubtedly say “No” to bond proposals. In addition to the principal amount borrowed, taxpayer dollars are used to pay off the interest that accrues on these bonds. Since 1980, approximately $604 million taxpayer dollars have been used to pay the interest on general obligation bonds while $206 million has been spent on interest for transportation bonds — $810 million in total.
Worse yet, when you include the principal amount borrowed, data from the Office of the State Treasurer show that taxpayers have foot the bill for a total of $3.4 billion in borrowing since 1980. This comes in addition to the ever-increasing cost of the biennial budget and the wasteful spending that has perpetuated over the years, and does not include the $643 million the state is slated to pay in debt service between 2020 and 2029.
To put this in perspective, if every dollar spent on interest for bonds over the last 39 years were given back to the Maine people, each Mainer would receive more than $600. This is a significant amount of cash that should not be discounted.
To be clear, this is money that could have been better spent on tax reductions or removing Mainers with intellectual disabilities from Medicaid waitlists. Alternatively, it could have been used to bolster the Budget Stabilization Fund (rainy day fund). According to a report released by the Revenue Forecasting Committee in 2018, the state of Maine does not have enough money in the rainy day fund to tackle a moderate or severe recession if one were to occur. These are the priorities and issues that the legislature would have been able to tackle if they were more fiscally responsible with taxpayer dollars during recent biennial budget negotiations.
The biennial budget approved by lawmakers in June spends roughly $8 billion over the next two years. The cost of Medicaid expansion and the increases to revenue sharing alone total approximately $200 million — more than enough to pay for the transportation bond, the rest of Governor Mills’ revised bond package and then some.
Nonetheless, liberal lawmakers proceeded to spend more money than necessary to keep promises to their base instead of tackling problems they were sent there to accomplish, such as fixing the state’s roads and bridges. Instead of putting these high-priority items in the budget, the governor and her allies in the legislature want to borrow more money.
Proponents of bond spending argue that, because bonds receive significant scrutiny in the legislature (two-thirds of lawmakers must approve a bond before it is sent to voters) and is approved by a majority of voters, this spending is acceptable and responsible. While bonds do receive considerable scrutiny, there are reforms lawmakers can pursue to make sure voters have all of the information they need to make an informed decision on Election Day.
It is both interesting and concerning that Maine voters almost always approve bonds. More than 81 percent of bonds have been approved at the ballot box in Maine since 1951. Since 2001, only three of the 57 bond issues that have been considered, or five percent, have been rejected by Maine voters. This isn’t unique to Maine; research from Ballotpedia shows that voters approved bonds approximately 83 percent of the time across 29 states after the year 2000. This means almost any bond passed by the Maine Legislature will receive the stamp of approval from voters in the next election.
One reason voters approve bond proposals could be due to an information deficit. Bond questions on the ballot in Maine only list the principal amount being borrowed and a summary of what the funds will be used for. If a voter had not done their research before entering the voting booth, they would not know the amount of interest that would be accrued over the life of the bond. This seems like critical information a voter must have access to in order to make a clear determination on the merits of the proposed borrowing.
Would you buy a house or a car without fully understanding the interest rate and the amount that needs to be repaid over the term of the loan? Most people look at the fine details before making these decisions in their personal life, so why don’t we arm voters with the same information when they enter the voting booth?
Potential Reform
If lawmakers want to give voters enough information to make an informed decision on bond proposals, they should pass a law that requires the ballot question or the ballot itself to include the total amount of interest that would be paid over the life of the bond. For example, the governor’s proposed $105 million transportation bond will cost taxpayers an additional $25 million in interest. If approved by lawmakers and voters, the question appearing on the ballot will read,
“Do you favor a $105,000,000 bond issue for reconstruction and rehabilitation of highways and bridges and culverts at stream crossings, for the renovation of a wharf and bulkhead at the Gulf of Maine Research Institute in Portland and for facilities or equipment related to ports, harbors, marine transportation, freight and passenger railroads, aviation, transit and bicycle and pedestrian trails, to be used to match an estimated $137,000,000 in federal and other funds?”
Some voters might have second thoughts about approving bonds if they knew the full cost of the proposed borrowing from reading the ballot question. In addition, there is zero harm in being more transparent with voters by putting more information in the question or on the ballot. However, some lawmakers and interest groups would undoubtedly oppose such a move in fear that more bonds would be rejected by voters.
In sum, this reform would help voters make more informed decisions on whether Maine should spend more money and incur more debt, or if the state should take a more disciplined approach to spending taxpayer dollars.