By Bruce Poliquin
Maine State Treasurer
Maine state government’s credit rating is an objective measure of our State’s economic and fiscal health. A strong credit rating is important to all Maine families for three primary reasons:
1. It gives confidence to investors who purchase our bonds (when they loan the State money) that those investments are safe and secure. That helps us to sell bonds again when we need money, for example, to build roads and bridges.
2. It lowers the interest payments to our bondholders that Maine taxpayers must pay.
3. Entrepreneurs compare state credit ratings when deciding where to invest their capital to start/grow their businesses and create jobs.
During the past two years, new leaders in Augusta have been setting the cornerstones to build a more inviting business climate. These building blocks are incentives for companies to invest their savings in Maine, and to expand and hire more workers. More jobs lead to higher family incomes, which generate more tax revenues and less government dependency. This, in turn, leads to a stronger credit rating which keeps our borrowing costs low and helps to attract more business investment and more jobs. And so the healthy economic cycle continues.
Here are some of those job-creating building blocks being put in place over the last two years:
- Reducing our public debt. Watch Maine’s debt clock unwind, the opposite of Washington’s reckless path. Last year, the LePage Administration and state legislature eliminated $1.7 billion of public pension debt, while creating a more secure retirement plan for 70,000 public school teachers and state employees. Also, approximately $250 million of hospital debt accumulated by the prior administration/legislature was paid off. Shrinking public debt encourages businesses to invest, expand, and add new jobs because less taxation is needed to pay off less debt.
- Rightsizing our Medicaid program. For the first time in decades, this huge, expensive and expanding welfare program is being downsized. The goal is to maintain an affordable health care safety net for our disabled, elderly, and other truly needy Mainers by realigning the benefits and eligibility with those in other states. Our Medicaid program has been swamping our state budget for many years. It has crowded out funding for other essential services like road/bridge repair, and helped to push up Maine income taxes to among the highest in the nation. Rightsizing our unaffordable Medicaid program will encourage business investment and jobs because, in part, it will require lower taxes to pay for the services.
- Replenishing our Rainy Day Fund. From 2008-09, Maine’s financial reserves were drained from roughly $129 million to less than $1 million to help pay for an oversized state government as the economy turned sour. During the past two years, the current Administration and legislature have grown the “Budget Stabilization Fund” (the State’s savings account) to nearly $45 million. This sign of improving fiscal health supports our credit rating and encourages entrepreneurs to consider investing and creating jobs in Maine.
- Stopping soaring health insurance costs. Over the past 21 years, the average premium increase for those buying individual health insurance has been 12.8%. This year’s average increase has been 1.7%. A new law enacted last year is introducing competition into the health insurance market to drive down costs. As the new law is phased in, Maine families and businesses will finally be able to purchase health insurance across state lines to further drive down premiums. Lowering Maine’s high health insurance costs will help attract business investment and jobs.
- Lowering energy costs. Maine families and businesses are extremely dependent on the high and unpredictable cost of heating oil, kerosene, gasoline, diesel, and other petroleum products. During the past two years, this Administration and legislature have aggressively embraced all sources of energy to lower the cost of living and doing business in Maine. For example, the expansion of natural gas pipelines to our mills, factories, and towns are expected to dramatically reduce energy costs in many parts of the State. This will serve as a substantial incentive for business investment and jobs in Maine.
- Allowing charter schools. Until last month, Maine was one of only 10 states not permitting K-12 students to benefit from the flexible curriculums and increased accountability of publicly funded charter schools. A new law enacted last year is now expanding educational choices in Maine. Today, as a start, students can apply to attend a 9-12 grade charter school in Fairfield focusing on hands-on agriculture and forestry. An elementary school in Cornville teaches core language arts, math, and science as well as hands-on gardening and woodworking. Other planned charter schools will provide concentrated study in marine resources, technology, visual and performing arts, and mathematics. Employers are attracted to states that offer their employees plenty of educational choices for their kids. In the long run, that means more jobs for Mainers.
The national credit rating agencies are watching how Maine is addressing its expensive state government and fragile finances. Let’s keep laying those real world cornerstones designed to lower the cost to live and do business in Maine. A growing business community with more and better jobs will generate the tax revenues we need to pave our roads, educate our kids, and care for the most vulnerable among us. Those expanded opportunities will better help us keep our kids here in Maine.