SCALED-DOWN BONDS

The bond-rating downgrade this week from Moody’s Investors Service adds to base closure and the borrowing in the state budget as a reason for reducing the amount of money the state proposes to borrow this year. This is less a reflection on the value of the projects than the reality of difficult times for state government and for the taxpayers of Maine.

Gov. Baldacci has proposed a bond package worth $197 million and containing money for job growth, primarily through research and development, highway funding, land-purchase money, as well as funds for construction at the University of Maine and Community College systems, environmental measures, hospice care and homeland security. It is an ambitious list and one that in better times would be worth supporting. These aren’t better times.

To his credit, the governor recently said he was willing to reconsider the size of the proposal after the Base Realignment and Closure Commission chose three sites in Maine to severely cut back or close. The decision by Moody’s to reduce Maine’s credit rating from Aa2 to Aa3, which has been hanging over Maine for a couple of years, reinforces that inclination because the downgrading makes borrowing more expensive.

The state has an obligation to fund certain programs such as municipal drinking water infrastructure and waste-water disposal, which it has typically done through bonds. Similarly, university and community-college renovations fall under the category of either paying something now or a lot more later and need support. But neither of these items are major costs in the bond package. Instead, it is an expansive definition of R&D ($79 million), highways and waterfront ($38 million) and land purchases ($50 million) that account for most of $197 million total.

The competing visions of Maine’s future budgets, modified somewhat by the BRAC announcement, are between the governor’s view that Maine is in severe but temporary difficulty vs. the Republican view that it is in severe and chronic difficulty. These views matter more when deciding whether to fund permanent programs, but they also affect what the state bonds for and how much.

If both sides at least agree that money to repay bonds will be scarce for at least the next few years, the programs they fund should add revenue to the state. That would be, first and most important, the R&D bond, in which university and biomedical programs leverage $7 for every $1 the state invests in addition to attracting new industries to Maine and creating permanent new careers. Second is highway money that also has large federal match rates, funds Maine’s share of the Waldo-Hancock Bridge and provides work at least for the length of the bond. Third is the land bond, which is desirable and especially valuable long term but less so short term.

The Legislature has the difficult job of saying no to many advocates for bond requests. It will be easier for lawmakers if they look at the condition of Maine’s revenues and realize, in some cases, it has little choice.