AUGUSTA — Gov. Paul LePage delivered the opening testimony Monday during a legislative hearing on bills dealing with the future of the state liquor contract and potential ways to address $184 million in Medicaid debt to the state’s hospitals.

“I have a plan to pay back the hospitals and make the liquor business more competitive with New Hampshire,” LePage told the Committee on Veterans and Legal Affairs. “I am very frustrated. … We must make the right decisions and we must pay our bills.”

The governor spoke just moments after Democratic leaders introduced an alternative plan to repay hospitals at a State House news conference. The Democrats, who control the Legislature, suggest combining the debt settlement with an expansion of Medicaid and other health-care related measures, in what party leaders called a more comprehensive approach.

LePage has offered an emergency bill that would use income from future liquor sales to pay hospital debt. He plans to issue bonds that would be repaid with future liquor sales.

LePage has promised to veto every bill that crosses his desk until his proposal passes. Once that happens, he said, he would advance $105 million in voter-approved bonds supporting infrastructure needs such as transportation and clean water.

If Maine settles its $184 million debt to the hospitals, the payment would trigger another $300 million in reimbursement to the hospitals from the federal government.

Another bill, from Senate Majority Leader Seth Goodall, D-Richmond, sets criteria that bidders on the liquor contract must meet, such as a down payment of up to $200 million.

“We may disagree on our approaches, but we agree with the governor. We need to pay back the hospitals. We must get the liquor contract right,” Goodall said in testimony on Monday.

The Maine Hospital Association testified in support of LePage’s proposal and said it did not speak in favor of or against Goodall’s new bill.

“We’re very happy to see there’s no controversy over using liquor revenue to pay the debt. We shouldn’t have to beg over an overdue bill,” said Jeff Austin, spokesman for the Maine Hospital Association.

When asked whether the $200 million upfront payment would squeeze out smaller bidders, Goodall said every publicly known bidder has the financial wherewithal to raise those funds. If a company can’t come up with the funds, it might not have the proper financial resources, he said.

“Cash is king in many negotiations,” Goodall said.

The hearing room was packed Monday, and so many people were waiting to testify that numbers were handed out, while others waited in overflow rooms. Testimony from about 45 people lasted about seven hours.

In 2004, Maine awarded a 10-year contract to operate the state liquor operations in exchange for a $125 million upfront payment that helped close a budget gap. The state also got a portion of revenue sharing, which last year came to $8.5 million. Gerry Reid, the head of the state’s liquor and lottery operations, estimated the state could get as much as $500 million over 10 years if a new contract is negotiated.

LePage’s proposal would outsource the management, inventory, warehousing and distribution of the liquor contract. The state also wants to lower the retail price of liquor to make Maine more competitive with New Hampshire, and pay higher commissions to agency liquor stores.

Reid said bottles under 750 milliliters and other items wouldn’t see their prices cut, to protect against overconsumption. Reid said small bottles can be tucked into pockets, which encourages consumption.

From mid-2004 through 2011, liquor sales totaled $864.7 million under the contract awarded to Maine Beverage Co., according to financial documents filed with the state.

Maine Beverage Co. previously said it was unlikely to bid on the new contract under the scenario proposed by LePage. Two potential bidders have emerged, Dirigo Spirit and All Maine Spirits. Reid said two other bidders also might bid, but they haven’t been named publicly.

“Nobody at Maine Beverage Co. believes a future contract would look like it did 10 years ago,” said Jim Mitchell, speaking on behalf of Maine Beverage Co. “The business is in a very strong position today. We can’t know how the business will do going forward.”

John Menario, vice president of All Maine Spirits, spoke against Goodall’s bill.

“Anyone who proposes legislation that delivers less than $450 million to the state is sticking it to the state of Maine,” Menario said. “If it were left to me, I’d let the governor get along with the RFP process.”

He objected to the nonrefundable application fee of $25,000 in Goodall’s bill, as well as the requirement for an upfront payment of up to $200 million.

Menario said his company could come up with that financing, if needed, but there would be interest costs involved.

He said that 10 years ago, Maine Beverage Co. delivered to the state “a pill that was sugar-coated cyanide that bought them control of the state liquor business. More than $330 million in profits left the state of Maine.”

Sixty percent of Maine Beverage Co. is owned by a New York private equity company, while the remaining 40 percent is owned by Massachusetts-based Martignetti Cos. All Maine Spirits was formed last year by six Maine residents for the purpose of bidding on the liquor contract.

Ford Reiche, president of Dirigo Spirit, said Goodall’s requirement of an upfront payment repeats the mistakes of the past by selling off liquor revenue to a company that writes a big check upfront.

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