DALLAS - Oklahoma Gov. Brad Henry has directed Treasurer Scott Meacham to determine how best to protect the state's economic interests in the midst of ongoing turmoil in domestic and foreign financial markets.
Henry said at a Thursday news conference at the state capitol in Oklahoma City that Oklahoma's economy is healthy, but he wants the state to be able to respond effectively as market conditions change.
"Oklahoma is very fortunate because its economy and its banks and financial institutions are strong, but we are facing an historic economic event," the governor said. "While there is no cause for alarm or panic in Oklahoma, we must be prepared and plan for every contingency.
"I'm asking Treasurer Meacham to conduct a complete review of Oklahoma's economic health and determine what actions might be needed to protect our state and our people," Henry said. "Obviously, Oklahoma has little power over Wall Street or the global economy, but we want to be as proactive as possible about assessing risks and meeting challenges."
Meacham said on Friday that the primary concerns are the lack of a market for pending state bond sales and the effect of the stock market plunge on state retirement systems.
"We have a $100 million Garvee bond issue for the Oklahoma Department of Transportation that is ready to go, and there are no investors in the market," the governor said. "The downside of not selling the bonds is that you just have to eat the inflation that occurs in the projects. But you can't sell them if there is no market.
"There are also problems with some of the state's outstanding variable-rate debt," he said. "Either we can't find a buyer when we try to remarket the bonds, or the rates are exorbitant."
Like other entities with significant Wall Street investments, Meacham said, Oklahoma retirement systems have suffered losses as the stock market has declined.
"The pension systems also have a lot of exposure with securities of Lehman Brothers," the treasurer said. "We met with the state's congressional delegation to support the economic recovery plan, anticipating that the money flowing into the market would enhance those securities."
Meacham said he had no timetable for presenting a report to the governor. He intends to meet with local and state officials, municipal finance experts, and the heads of the state pension systems in the process.
"I think we'll move fairly quickly, but we're seeing new things pop up in the market every day," he said. "We will be looking at options that could involve the state's congressional delegation, and at the state legislative options, such as making it easier to issue debt."
Meacham said Oklahoma is in good shape to weather the current financial crisis, with a surplus of $82.8 million, almost $600 million in the rainy-day budget stabilization fund, and revenue collections that are showing increases from fiscal 2008.
Chris Cochran, executive vice president and director of public finance with underwriters Capital West Securities in Oklahoma City, said he is advising local governments to avoid the current market.
"We're suggesting to our clients that they delay competitive sales for the next few weeks, if not months," he said.
However, Cochran said he sees a reason for optimism for the municipal finance market.
"I think this has been a good week for municipal bonds," he said on Friday. "Not many are selling, but some are. That is a positive step."
Oklahoma's GO debt is rated Aa3 by Moody's Investors Service, AA-plus by Standard & Poor's, and AA by Fitch Rating.
