SAN FRANCISCO — Oregon’s debt commission has unanimously backed a proposal by the state treasurer to temporarily halt general-fund-backed public borrowing until state finances recover.
The State Debt Policy Advisory Commission also agreed during a special meeting to ask the Department of Administrative Services to reconsider the timing of some approved bond-financed projects that have yet to sell bonds, the treasurer’s office said in a release Friday.
The office left unnamed the debt-funded projects that could be benched.
“We have a responsibility to Oregon taxpayers to protect the state’s strong credit rating and to avoid the mistakes of other state governments that have tried to borrow their way out of deficits,” Treasurer Ted Wheeler, who is the commission chairman, said in a statement Friday.
Wheeler noted in the release that the legislature borrowed $431 million in 2003 to pay for operating expenses, which has yet to be fully repaid. He said the state could end up paying roughly $70 million a year through 2013 to retire that loan.
In August, the state economist forecast a revenue drop of more than 3% to $12.3 billion, due mainly to a dearth in tax collections. Gov. Ted Kulongoski has said he would start slashing spending to cope with the shortfalls.
Oregon adopted a $13 billion biennial budget that plugged a projected $3.8 billion budget hole by cutting spending, new revenues, federal stimulus and using reserves. Earlier this year, voters also approved income and corporate income tax hikes.
Housing sales in Oregon have fallen and its unemployment rate has remained around 10.5% the past eight months.
A recent report by Moody’s Investors Service said the state’s debt burden remains above average.
Its 2010 net tax-supported debt as a percentage of personal income is 4.5%, and the state’s debt per capita is $1,606, which is well above Moody’s 50-state median of 2.5% of personal income and $865 per capita, according to the report.
The debt commission is charged with recommending debt capacity. It’s comprised of Wheeler, two appointed legislators, the director of administrative services and a citizen.
The recommendation arrives as Oregonians in November will consider a proposition that, if approved, would allow the state to issue more general obligation bonds to save on borrowing costs.
As it stands, the state can only pay for things itemized in the constitution with GOs. This measure would negate that check
Oregon now funds many essential public improvements through certificates of participation, which require higher interest because they are not backed by the full faith and credit of the state. Instead, they’re paid from appropriations approved by the legislature.
The principal and debt-service payments for Oregon’s COPs are not secured by a revenue source and the government lacks the authority to levy taxes beyond constitutional limits to pay interest, according to the treasurer’s office.
Moody’s Investors Service assigns the state’s GOs an Aa1 rating, Standard & Poor’s gives them an AA, and Fitch Ratings gives them an AA-plus. Moody’s rates the state’s COPs Aa2, Standard & Poor’s rates them AA-minus, and Fitch rates them AA.
As of the end of August, Oregon had sold $62.5 million of bonds in four issues, according to Thomson Reuters. Oregon’s total net tax supported debt is $7.1 billion, according to Moody’s.
Ted Wheeler was appointed to that post by Kulongoski earlier this year after Treasurer Ben Westerlund died from cancer. He faces off against Republican-challenger Chris Telfer, a state senator.
Telfer, a certified public account, was elected to the senate in 2008 to replace Westerlund after his elevation to treasurer.
The two will battle to win a special election to finish out Westerlund’s term, which ends in 2013.
