Treasurer hints base listings may hurt bond ratings

AUGUSTA – State Treasurer David Lemoine told a legislative panel Monday that last week’s Pentagon announcement on potential base closings probably made a difficult task of maintaining Maine’s bond ratings even harder.

“As of Friday I think all bets are off,” Lemoine told the Appropriations Committee.

The state is planning to market bonds worth more than $140 million in early June. Lemoine, a Democrat elected to the treasurer’s post by the Democratic-controlled Legislature, said state officials had asked for ratings updates by the end of the month.

For weeks, Lemoine and Baldacci administration officials have warned that the state could face lowered bond ratings. Concerns rose substantially in February when Moody’s Investors Service said it had placed the state’s general obligation bond rating, Aa2 with a stable outlook, on its Watchlist for a possible downgrading.

Since then, amid partisan sniping, Democratic administration officials and Lemoine have stepped up their warnings while citing the potential for a people’s veto referendum, backed by a number of Republican lawmakers, on a $450 million borrowing provision in the pending state budget.

On Friday, the Defense Department proposed closing the Portsmouth Naval Shipyard and eliminating all aircraft and half the military personnel at Brunswick Naval Air Station.

Brunswick would lose 2,300 military and 60 civilian jobs. The base has 4,800 military and civilian employees and Portsmouth has 4,300 civilian workers.

The Pentagon also proposed closing a Defense Finance and Accounting Services center created at the former Loring Air Force Base, a move that would cost 241 jobs, according to the DOD, although the Limestone center’s director, Larry Conrad, said 362 people are employed there. Finally, the Pentagon proposed the elimination of a small Naval Reserve Center with seven civilian jobs in Bangor.

The Maine Air National Guard base at Bangor International Airport would gain about 240 military and civilian jobs.

Lemoine said Monday his concern over the state’s bond rating was not limited to possible action by Moody’s, but also by Fitch Rating and Standard & Poor’s.

Lemoine told lawmakers that, in addition to the potential people’s veto, state officials also had heard Wall Street concern about a projected future imbalance between available state revenue and spending demands.

According to the state’s Wall Street presentation, Maine faced a projected structural gap for fiscal 2004-2005 of $1.2 billion and for fiscal 2006-2007 of $733 million.

The state faces a gap for the 2008-2009 biennium of $630 million, according to the state presentation, which was made available to The Associated Press by the office of Gov. John Baldacci.

The state presentation said 35 percent of the 2006-2007 gap and 42 percent of the 2008-2009 gap were “directly related” to last year’s successful citizen initiative requiring increased state funding for education.

The Baldacci administration and its Democratic allies have characterized the borrowing proposal in the pending state budget as pension cost reduction bonds, while Republican critics have likened the provision to deficit spending. The state faces a mid-August deadline for issuing bonds called for in the pending budget, but the borrowing provision could be stayed if people’s veto organizers submit 50,519 petition signatures to state election officials by June 28. The secretary of state then would have 30 days to determine the validity of signatures.

If the petitions are determined to be valid, the people’s veto proposal would go on statewide ballots on Nov. 8. If the petitions are invalidated, the suspended budget provision would go back into effect, according to state officials.