Bond issues won’t increase state’s debt load

Voters actually will be voting on four bond questions this year – two on Tuesday and two in November. Even if all are approved, Maine will owe less after the November election than it does now because the state is paying off the balance on older bonds, according to the state’s treasurer.

Question 1 on Tuesday’s ballot asks voters to allow the state to borrow $28.5 million for the school revolving renovation fund, college dormitory sprinkler systems and other matters. Question 2 seeks $34.97 million to stimulate job growth, renovate buildings, defend against terrorism and promote tourism.

On the Nov. 5 ballot are two more bond requests. One is for $25 million for a new prison in Machias and renovations at the Maine Correctional Center in Windham, and the other is for $24.1 million for agriculture and environmental programs.

According to Treasurer Dale McCormick, Maine currently owes $434 million in bond debt. In this fiscal year, which ends June 30, Maine will be retiring bonds of more than $87.5 million. In the next fiscal year, the state should be paying off about the same amount, she said.

Maine is limited to how much it can borrow in bonds, McCormick said. The state has what’s called a “debt control formula” that limits the amount of money that can be borrowed to no more than 5 percent of general and highway fund revenues, she said. Currently, Maine has borrowed 4.6 percent, and that number should be going down because of the bonds that are being paid off.

In comparison to most other states, Maine borrows less money in bonds and pays them back over a shorter period of time, she said. While most states borrow money with terms of 15 or 20 years, Maine takes out loans for 10-year terms.

If the voters approve the bonds next week and in November, the money may not be issued all at once to the organizations requesting it, McCormick said. Some groups may not need the money right away, and there’s no need to pay interest on money that’s not needed yet, she said. Federal law prohibits the state from borrowing money and then investing it to gain a higher rate of return before distributing it to the state groups using the bond, she said.

Interest rates on bonds currently are about 4.9 percent, and about 2.9 percent for tax-exempt construction loans, she said.

Maine, too, owes less per capita in bonds compared to most states. The national average of debt per capita is $810, while in Maine it is $554, McCormick said. In Connecticut, about $2,000 is owed per capita in bond debt, she said.