Baldacci unveils $197M bond package

AUGUSTA – Declaring that much-needed infrastructure improvements are vital to ensuring Maine’s competitive edge, Gov. John E. Baldacci unveiled a $197 million bond package for the state’s next two-year budget cycle Wednesday and urged lawmakers to support the borrowing proposal.

“This bond package will create good-paying jobs with benefits and grow Maine’s economy,” the governor said. “It’s fiscally sound. It’s equal to the amount of principal being retired by the end of the (next two-year budget cycle), and it’s well within the state’s five percent debt-to-revenue goal.”

Baldacci said his bond package would leverage more than $250 million in federal and private matching funds to deliver a punch to the state’s economy valued at nearly a half-billion dollars.

“A half-billion in construction, real estate, finance, research and engineering will create and sustain more than 2,000 jobs in 2006 alone,” he said.

Reasoning that Maine will retire about the same amount of debt over the next 29 months, Baldacci said the package would not adversely impact the state’s borrowing profile. Maine’s debt-per-capita is already 30 percent lower than the national average.

“Our future is bright and we have made significant progress,” he said. “This bond package will continue strategic, targeted investments that will keep Maine on the path to becoming a national leader in providing opportunities for all of its citizens.”

Job creation programs ate up the largest segment of the seven-tiered borrowing plan at $78.85 million, followed by $50 million for the Land for Maine’s Future Program, $38 million for transportation projects, $16.5 million for clean water, environmental and health initiatives, $12 million for education, $1 million for a new statewide hospice program and $1 million for homeland security to make improvements at the Maine National Guard Armory.

The proposal was particularly welcomed by University of Maine System Chancellor Joseph W. Westphal, who said $25 million of the bond package would have positive implications for several system programs including biomedical research and development at the University of Maine and the University of Southern Maine.

“The bond package recognizes the tremendous success and potential of the three-way partnership between the university system, the state and the private sector,” Westphal said. “Maine knows from experience that investment in university-based research produces jobs and economic growth.”

Democrats at the State House were supportive of the governor’s proposal while Republicans remained circumspect in their reaction.

Republican leaders indicated last week they would be more likely to support a bond package in the $130 million range.

But any support from the GOP is a huge improvement for Baldacci. Last year, Republicans rejected a November bond package in retaliation for a Baldacci-backed majority supplemental budget.

Any state bonding proposal must receive a two-thirds vote in the House and Senate before it can be sent out to the voters.

Senate GOP Leader Paul Davis, of Sangerville, and Assistant Senate Republican Leader Carol Weston of Montville agreed that more must be done to reduce state spending before launching into a new plan for borrowing more money.

When factoring in all of Maine’s outstanding debt, Republicans maintain the state currently owes more than $5 billion including all debts and unfunded liabilities.

“We don’t think it’s appropriate to look at bonds in a vacuum,” said House GOP Leader David Bowles, of Sanford.

To that end, Republicans have formed a working group consisting of some of the GOP’s best economic analysts in the Legislature to evaluate Baldacci’s proposal.

The panel includes Sen. Richard Rosen of Bucksport, Sen. Peter Mills of Skowhegan, and Rep. Sawin H. Millett, a Waterford resident who served as Gov. John R. McKernan’s chief of finance.

Republicans are very concerned over last week’s announcement by Moody’s Investors Service declaring Maine had been placed on a “watchlist” for a possible downgrading of its bond rating.

Should the Wall Street firm reclassify the state’s financial status, Maine would be forced to pay a higher interest rate for any new debt assumed during the next two-year budget cycle, which begins July 1.

Moody’s was particularly concerned over what it described as the “persistent weakness in Maine’s financial position despite revenue and job recovery.”

The firm also said the state must do more to replenish its depleted reserve accounts designed to help Maine weather the next economic downturn.

Baldacci said he and members of his administration were working with Moody’s to provide the firm with more information in hope of reaching some agreement that could stave off any downgrade.