Ending a long standoff, Maine’s governor has signed a bill that will trigger the sale of at least $290 million in bonds and provide the state’s hospitals with $484 million that they were owed.
Since taking office in February 2011, Republican Gov. Paul LePage had declined to approve the issuance of $105 million of bonds approved by the voters in November 2010 and 2012.
LePage has called for the state to pay off $186 million in Medicaid debt it owes to its hospitals before he would release the voter-approved bonds. For several months this year LePage was bogged down in a debate with Democratic legislators on how to raise this sum.
Ultimately, the Maine legislature approved a liquor bond similar to LePage’s original proposal. LePage signed the bill Friday.
A 10-year private contract for the wholesale sale of liquor in state is expiring in the summer of 2014. The state will take over the wholesale sales operation while still leaving the distribution to a private contractor.
The bill LePage signed calls for the state to issue $186 million of bonds backed by anticipated liquor revenue. Of this money $183 million will be handed to the state’s hospitals. Once the state has paid its Medicaid debt, the federal government will kick in what it owes for Medicaid, leading the hospitals to get a total of about $484 million.
“Paying our bills is the right thing to do, it’s just unfortunate that Democrats waited so long to make the right decision for the people of Maine,” LePage said.
On Friday, LePage also promised to sign the voter-approved bonds for $105 million. About half of this money will be for transportation infrastructure improvements. The other half will be used for conservation, clean water upgrades, and energy efficiency projects at colleges and universities.
“I think it’s a great move forward,” Maine House assistant majority leader Jeff McCabe, D-Skowhegan, said about the impending bond sales.
Maine’s hospitals were heartened by their impending receipt of nearly half a billion dollars.
“It’s a big deal,” said Steven Michaud, president of the Maine Hospital Association. Since the state stopped paying the Medicaid bills it owed them in 2009, the hospitals have been drawing down their cash reserves. The payment will replenish the reserves, he said.
Some have taken out a line of credit from banks to meet payroll. The Medicaid money will allow them to stop paying interest to the banks, Michaud said. The hospitals can stop being up to six months late on paying bills. They can stop postponing the purchase of equipment.
Michaud said he expected the money to reach the hospitals by October 1.
“We’re thrilled,” said Michael Koziol, chief financial officer at MaineGeneral Health, whose hospitals are owed $38 million.
“We certainly view [the transfer of the Medicaid money to the hospitals] positively from a credit standpoint,” said Fitch Ratings associate director Emily Wadhwani. “This financing will allow for a lump sum payment of the receivable, which will have a positive impact on Maine’s hospitals,” she said. “This impact will be most beneficial to their liquidity, as the payment will go right into cash on their balance sheet. They recognized the revenue in the prior years in which it was accrued, so there should be little to no impact to their income statement.”
In the last several months Gov. LePage has said that once the Medicaid debt was paid, he would propose to sell a $100 million bond to build a new prison and an additional $100 million bond for transportation projects beyond the voter-approved bonds. The governor’s spokeswoman did not respond to a call to confirm LePage’s intentions with these two bonds.