Maine Gov. John Baldacci pointed to several other states that have swapped future revenue streams for up-front cash Monday as he defended his plan to capitalize up to $40 million a year in lottery revenues for $250 million in the upcoming budget.
The Democratic governor fended off criticism of his plan to sell a decade´s worth of Maine lottery revenues to the Maine State Retirement System or other investor. It would help the state to increase public school subsidies while balancing a $5.7 billion two-year state budget without a tax increase.
"I looked at this and said what´s not to like about it," said Baldacci. "If there´s another way of doing this, I want to know about it."
Baldacci responded to newspaper editorials that echoed statements by Republicans shortly after the budget was released Friday. The Portland Press Herald on Monday called the proposal "bad fiscal policy" that fails to address underlying budget problems. Lewiston´s Sun Journal dismissed it Sunday as "a temporary patch."
Assistant Senate Republican Leader Carol Weston of Montville said earlier that Baldacci´s plan is no long-term solution to the state´s fiscal woes. State GOP Chairman Randy Bumps used stronger rhetoric, calling it "irresponsible."
On Monday, Baldacci responded on three fronts.
Defending his plan as an innovation that has been tried with success in several other states, Baldacci said it could help the Maine State Retirement System by giving it a guaranteed rate of return that exceeds its corporate portfolio earnings.
The governor also pointed to an analysis by state economists of the impact of pumping $250 million generated by the lottery revenue sales into additional school subsidies. The money spent as a result of lower property taxes would translate into 1,300 new jobs in 2006 and an additional 2,300 jobs in 2007, the report said.
The administration also produced a list of other states with similar bond ratings that have capitalized various revenue streams in ways similar to what Maine is contemplating. Some involve lottery revenues, the administration said.
While the National Conference of State Legislatures was not aware of any other states that have capitalized lottery revenues, it agreed that the idea is not new.
"The most-cited example is in regard to tobacco settlement moneys that are flowing to states as a result of a master settlement from the late 1990s," said NCSL fiscal analyst Arturo Perez. The future revenues are sold to private investors.
New Jersey tried a similar tact by borrowing from future income from a 35-cent-per-pack increase in the cigarette tax, said Perez.
As long as Maine doesn't mess around with annuities...