Bond issues’ economic effect will be long-term, experts say

AUGUSTA – Mainers will be asked to approve borrowing $146.4 million for a wide range of projects at the polls next Tuesday. Some are urging support based on the economic impact of the proposals, but Maine economists say such benefits are long-term and will do little to act as an immediate stimulus for the weak economy.

“What we need to provide an immediate stimulus to the economy is more money in the pockets of people that will spend it,” said David Findlay, chairman of the economics department at Colby College. “That’s a federal issue; that’s what Congress should be doing, not providing tax breaks to those that don’t need one.”

Maine’s economy would benefit from the construction and investment in state infrastructure proposed in the six bond issues on the ballot, said Bates College professor James Hughes, chairman of the economics department. But, he said, there would be little of the immediate stimulus needed to boost the economy.

“These are mostly construction projects that are months if not a year or more away,” he said. “People should consider the long-term benefits of the projects, because they are significant.”

University of Southern Maine economics professor Michael Hillard agreed. He said new construction has an important “multiplier effect,” with every dollar spent generating $2 in economic activity.

“And there is a great long-term benefit from the investment in facilities that improve the access to higher education in Maine, whether at the university [system] or at the technical colleges,” he said.

Hughes agreed. He said the economic benefits from a highly skilled work force ripple throughout the state with many employers making decisions on investments based on the availability of an educated work force.

“We have to look at some of these issues in the very long run of what is good for the state,” he said. “By their very nature, bond issues are a long-term stimulus, not a short-term stimulus.”

But Bowdoin College professor David Vail said while he agreed passage of the bond issues would not provide an immediate stimulus, there could be a benefit in the relatively near term.

“If Maine is starting to pull out of the recession in the third or fourth quarter of next year, some of these projects could be under way and help with the recovery,” he said.

And some of the bonds will have a bigger impact than others because of matching federal funds. For example, $3 million for drinking water system improvements will provide the state match for nearly $16 million in federal funds.

Some of the campaigns urging passage of certain bond proposals are touting them as means to help create new jobs and maintain existing jobs.

There are only a few campaigns promoting the bonds and no organized opposition to any of the six statewide questions on the Nov. 6 ballot.

State Treasurer Dale McCormick put out a news release earlier this week titled, “Bond Issues, the Economy, and the State of Maine,” that listed several ways passage of the bonds would stimulate Maine’s economy. But McCormick said the release was “educational” and not designed to influence voters.

“You can’t tell people how to vote and I wouldn’t tell people how to vote, ” she said. “But bonding is complicated and not well understood. Several lawmakers asked me to put together an answer sheet, and that is what this is.”

McCormick said she personally supports all of the borrowing proposals because they are for needed projects.

“And interest rates are the lowest they have been in a long time – since 1957,” she said. “This is the time to borrow.”

Maine currently has more than $479 million in bonded debt, adding both the debt paid for by the highway fund and state’s General Fund. There is another $192 million in bonds authorized by the voters or by the Constitution and state laws but not sold.

In the current state budget year, which ends next June 30, the state makes the final payments on $87 million in bonds, retiring that debt.

State Economist Laurie LaChance said there is no question the benefits of the bond issues being voted on Tuesday are long-term. But she said the attitude of consumers is very important in a national economy driven by consumer spending.

“Voting for the future by voting for the bond issues is one of the few things that Mainers can do to take control of the situation,” she said. “By voicing a vote of confidence in the future and investing for the long term, we are saying we have faith in the future.”