Treasurer accused of inaction on Pike

Lieutenant governor counterattacks after criticism of bailout

Lieutenant Governor Timothy Murray yesterday accused state Treasurer Timothy Cahill of failing to help devise a financial bailout for the Massachusetts Turnpike Authority, despite knowing of its looming debt problems almost three months ago.

In unusually heated criticism, Murray said Cahill, the state's top financial officer, signed off on the outlines of a plan to rescue the Turnpike Authority in April, only to then criticize it this week when details were reported.

"He's been informed about this since April. He had plenty of time to come forward with ideas, and we have not heard from him," Murray said.

"What is reckless in this situation is to do nothing . . . because the turnpike could end up facing a $200 million payment that would fall on the backs of the toll payers."

Murray's comments came one day after Cahill harshly criticized the Patrick administration's plan to essentially act as a cosigner on the Turnpike Authority's crushing $2.4 billion debt, which would allow the authority to use the state's higher credit rating to refinance the debt.

The plan is aimed at lowering interest costs on an $800 million portion of the debt that is tied up in complex loans that have gone sour in recent months, putting the authority at risk of tens of millions of dollars of unanticipated costs.

In a story in the Globe yesterday, Cahill said the administration's plan "borders on fiscal recklessness," arguing that it puts taxpayers at risk of paying the Turnpike Authority's debt while failing to improve oversight of its financial management.

Yesterday, Cahill acknowledged that he signed off on a financial disclosure statement April 16 that included details of the Patrick administration's plan to back the Turnpike Authority's debt. He said his objections this week are due to changes in the plan that would substantially increase the amount of debt to be supported by taxpayers.

"The suggestion in the [disclosure] statement was a much smaller exposure of $800 million, and now we're talking about almost $2.5 billion," Cahill said. "It's a full-scale bailout with no responsibility."

Top aides to the governor said the move to back the authority's full debt load is due to circumstances that arose late last month, when an insurance company backing the bonds had its credit rating downgraded.

If the company, Ambac Financial Corp., suffers another downgrade, the Turnpike Authority could be forced to make an immediate debt payment of $179 million, a sum officials have said the authority cannot afford.

The tensions between Cahill and the Patrick administration contributed to widely divergent reactions to the rescue plan on Beacon Hill.

The House of Representative approved the plan unanimously Tuesday, with a top lawmaker saying it is a prudent financial step. "We think it makes sense," said State Representative Joseph Wagner, a Chicopee Democrat and cochairman of the Legislature's Committee on Transportation. "This is a safeguard for everyone involved."

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, said the administration's proposal does not solve the Turnpike Authority's underlying financial problems and could lead to huge losses for the state.

"There are all sorts of things happening that no one ever expected in the larger credit and financial markets," he said. "I don't know how we can guarantee the state is not going to be on the hook for this."

State senators are scheduled to hold a hearing today on the debt proposal.

Senate President Therese Murray signaled initial support for the administration's plan yesterday. "The consequence of not doing anything, and the specter of defaulting, would have too severe an impact on toll payers," Murray, a Plymouth Democrat, said in an e-mailed statement. "The Senate intends to take this up."

The lawmaker in charge of today's hearing, Senator Mark Montigny, Democrat of New Bedford, said he intends to push for changes in the Senate version of the bill that would require state authorities to obtain approval for complex financial transactions from the governor's financial executives.

"The crisis we're in right now means these reforms are more necessary now than they've ever been," he said. "It's a symptom of a much bigger problem with quasi-independent authorities like the turnpike."

Casey Ross can be reached at cross@globe.com.