As the old adage from Benjamin Franklin goes: “in this world nothing can be said to be certain, except death and taxes.” For Mainers, the following addition should be made to the end of that phrase: “*and elections that include a question to issue new bonds.”
The extension to that idiom may sound silly, but it’s certainly factual. Maine voters have cast a ballot on a measure related to bonds every year since 2007, save 2011. To that end, of the 35 bond measures on the ballot over that time period, voters have a near “perfect” record, having approved 34 of them, according to data from Ballotpedia. Achieving this record is quite costly as the principal cost of these measures totals more than $1.25 billion without taking into account the accrued interest that forms over a bond’s lifetime.
In a statewide election next Tuesday, July 14th, voters will have the opportunity to “improve” their approval percentage as two bond measures are on the ballot, which combine for a total $120 million. Question 1 would issue up to $15 million in bonds to bring internet to underserved and unserved areas in the state. Question 2 would authorize $105 million in general obligation bonds for transportation infrastructure projects.
Bonds can be an effective funding mechanism for expensive capital projects, as the cost is spread out over a long period of time. However, bonds can be problematic for taxpayers as the accrued interest on the principal amount makes the total cost far more expensive than the issuance cost. So while there may be an economic benefit today from construction or repairs to infrastructure, it will ultimately leave future taxpayers to cover the cost of the interest and principal.
Even though voters have approved more than $1.25 billion in new bonds to help fund transportation and other infrastructure projects across Maine, state spending for the transportation department has ballooned, rising from $550 million in FY15, to $693 million in FY20. That’s a 26 percent increase in spending over a five year period despite the state’s population rising by only 1.2 percent over the same period. It’s clear that spending is far outpacing population growth, so what exactly is this new money being used for and is this level of spending necessary?
Investment into transportation and infrastructure is important, but let’s not believe that Maine is suffering from a lack of investment dollars flowing into projects across the state. With that in mind, voters interested in responsible state governance and sound fiscal policy should be wary of this latest measure and question if more bonded debt is truly needed.