Opinion

Just say no to bonds

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In June, Gov. Janet Mills proposed a package of bonds that amounted to a whopping $239 million in new debt for the state of Maine.

On Monday, Mills called for a special session of the Legislature to vote on many of these bonds, highlighting the most popular and widely supported among them by emphasizing the transportation bonds.

Roads are popular. In Maine, they’re terrible, and everyone is sick of losing a wheel into the center of the Earth while driving on a major thruway. So when politicians propose “fixing the roads,” it has never particularly mattered to them how that is done — with cash or with debt — they simply want it done.

Indeed, the popularity of road bonds is actually routinely used as a political weapon. In this case, for instance, Mills’ proposal from June submitted the transportation money as an all-encompassing package with less popular bonds.

Packaging all the bonds as one item forces lawmakers to vote yes on all of the bonding just so they are able to vote yes on the bonds they do like. No one wants the nasty mailer sent to their district saying that he or she “voted against fixing our roads.”

That’s a one-way ticket to losing your next election.

This is not how bonding should be done, and taking out new debt should be treated with great care, and great scrutiny. Even transportation bonds need to have some hard questions asked about them.

Like, for instance, why they are even necessary.

In a year when the state budget rose by roughly $800 million and the state is flush with cash and a surplus is expected, why in the world are we taking on debt to pay for new road construction? Why is critical and popular infrastructure that Republicans and Democrats agree needs funding not the very first thing funded?

The answer is actually quite simple. It is the universal popularity and necessity of these projects that guarantees that bonding will be used to fund them.

With more controversial proposals — like most of the Mills budget explosion — it is far easier to use a partisan majority in the Legislature to ram through spending. The contentiousness and divergent public opinion means that if the public was asked to spend money on those priorities through debt, there would be a high likelihood that they would say, “no.”

So pass as much controversial spending as possible, and then take the slam dunk spending that the public loves and dump it into a bond and ask them to vote on it.

This guarantees that the government can spend well beyond its means. At the end of the day, though, spending is spending, whether through cash or debt.

Contrary to what some people suggest, despite low interest rates, borrowing money is neither “free” nor “basically free.” The debt must be paid back, and the interest hurts.
Since 1980, roughly $604 million has been paid to pay back the interest on general obligation bonds in Maine, while $206 million has been spent on interest for transportation bonds. That amounts to a total of $810 million — in just interest.

According to the Office of the State Treasurer, if you include the principal amount borrowed on top of that, taxpayers have sunk a total of $3.4 billion in debt repayment since 1980.

This debt repayment — especially the interest — crowds out funding opportunities that could be made with cash. Put another way, it is harder to pay for new roads this year because I’m too busy paying for the road that has already crumbled.

Lawmakers and the public need to stop and consider this as they are presented with bonds. Lawmakers should seek to avoid new debt at all costs, and in the event that voters are asked to take it on, they should force the politicians into more rational fiscal decisions by saying no.

Matthew Gagnon of Yarmouth is the chief executive officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. A Hampden native, he previously served as a senior strategist for the Republican Governors Association in Washington, D.C.

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