Oregon’s Incumbent Treasurer Takes a Stand Against GOs

SAN FRANCISCO — Government borrowing has a central role in the ­Oregon race for treasurer after incumbent Ted Wheeler took a stand against general obligation bond sales amid the state’s dire economic outlook.

Wheeler, who was appointed to the post by Gov. Ted Kulongoski earlier this year after Treasurer Ben Westlund died from cancer, will face off this November against Republican challenger Chris Telfer, a state senator.

Telfer is a certified public account who was elected to the Senate in 2008 to replace Westlund after his elevation to treasurer. She will battle Wheeler to win a special election to finish out the term that ends in 2013. So far, political observers see Wheeler as likely to win the office handily, since registered Democrats outnumber Republicans in the state. 

Wheeler recently made headlines when Oregon’s debt commission unanimously backed his proposal to temporarily halt general fund-backed public borrowing until state finances recover.

“Your readers will probably like to know why on the earth I did that since they have vested interest in the bond market,” Wheeler said in an interview with The Bond Buyer. “The answer is this — Oregon is in pretty bad financial shape. We are looking at a $3.2 billion budget deficit on a budget that is only $15 billion.”

He said that legislative leaders and gubernatorial candidates all appear to understand the need to keep the state’s historic debt-service level below 5% of the total general fund rather than use debt to prop up the operating budget.

Wheeler said he wanted to bring attention to the issue before the legislature meets again in January because he had been aware of different bonding proposals circulating by lawmakers.

“It is not that the state has gone hog wild on the issuance of new debt — they haven’t. The problem is that the general fund is shrinking as a result of declining economic forecasts so we are finding ourselves, artificially if you will, at that 5% limit,” he said.

The Legislative Assembly borrowed $431 million in 2003 to pay for operating expenses, which has yet to be fully repaid. Wheeler has noted that the state could end up paying $70 million a year through 2013 to retire that loan.

Telfer declined to be interviewed for this story, but she has also said she would try to ensure that legislators do not try to balance the budget through excessive debt and borrowing.

In the event lawmakers go ahead and authorize the sale of GOs, Wheeler declined to say whether he would refrain from issuing the debt, though he noted that he did not know a case in the state’s history where a treasurer did not carry out the orders of the legislature.

“The question is whether or not the legislature will be able to close out this biennial without issuing new debt and I don’t know the answer to that question,” he said. The state’s two-year budget cycle began in July.

Wheeler also said he would work hard at improving transparency and disclosure in his office. Just days after taking office, the treasurer’s office came under scrutiny because of alleged excessive travel expenses.

In terms of bonds, Wheeler said he feels the office has a good disclosure policy because it books returns on a quarterly basis with a one-quarter lag.

The treasurer said he has full confidence in his debt management staff and does not expect any major changes with how it operates.

When asked about the question of selling bonds in negotiated versus competitive sales, he said he did not “have a strong feeling” on the issue.

The treasurer’s investment division manages a portfolio of $68 billion that includes pension and retirement assets.

Wheeler said he has no plans to change the way the money is invested, only that if elected he will try to make sure the money is spread out among money managers and without too much focus on one asset class.

“As the far as the way we invest, I don’t see any reason to change our basic investment strategy or our allocation mix — we are within our targets on our allocations,” he said.

Telfer has said she would keep a “watchful eye” on the office’s investments. She said her background — which includes working as an accountant, a council member in the city of Bend, and a state senator — would help her get the best returns on investments.

Wheeler has a degree in economics from Stanford University, an masters of business administration from Columbia University and a master of public policy from Harvard University. He previously served as chairman of the Multonomah County Board of Commissioners, which is the largest county in the state and includes Portland. He also worked for several financial services companies.

Since he already holds office, has support from a majority of Multonomah County voters, and is running in a Democratic-leaning state, experts say Wheeler may win by a wide margin.

“Ted Wheeler has done an amazing jobs establishing himself as the incumbent,” said Jim Moore, a political ­science ­professor at Pacific University in Oregon. “I would expect him to win pretty ­comfortably.”

Moore said the race is mostly off ­people’s grids and many will vote based on party affiliation. He said there are around 200,000 more registered Democrats than Republicans in Oregon.

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