“Paying this debt is the right thing to do,” LePage told the Veterans and Legal Affairs Committee in a rare appearance by a governor before a legislative panel. He said his proposal has nearly universal support from Maine’s hospitals, some of which are using letters of credit to get by.

The Republican governor is proposing covering the debt right off using bonds, which would be paid with anticipated revenues from a restructured liquor contract.

“Our plan before you will create jobs in the health care industry and in the construction industry,” he said.

The governor said the hospitals would be able to rehire many employees who have been laid off because of financial hardship caused by the debt. And he said hospitals have delayed expansions that would create hundreds of construction jobs.

Even before the committee opened its hearing, legislative Democrats presented an alternative plan that would pay the hospitals in full by Sept. 30, 2013, using money from the financing on the state’s liquor contract. As under LePage’s plan, the state’s share of the overall debt would be matched by a federal match of $298 million.

But Democratic leaders say their plan is better because it would not require the state to borrow money through revenue bonds, a plan that they consider constitutionally shaky and that would cost taxpayers $40 million more in interest costs.

During a news conference before the start of the hearing, Senate President Justin Alfond, D-Portland, acknowledged the state’s obligation to pay the hospitals. Under the Democratic plan, the state would require an up-front payment by the winning liquor contract bidder for the state’s $400 million liquor business.

“By requiring this up-front payment, we are asking private industry to assume the risk, not taxpayers,” Alfond said, adding that the plan comes with a guarantee that the hospitals receive their money by Sept. 30.