DALLAS - Oklahoma Treasurer Scott Meacham said yesterday that action on suggestions to improve the process of issuing municipal debt must await development of a balanced state budget for fiscal 2010.
"The budget is the 800-pound gorilla in the room," Meacham said. "That's the important issue on the table at this point."
The Legislature - which has a Republican majority in both chambers for the first time since Oklahoma became a state - has completed the first week of its 2009 session. Lawmakers are working to resolve a budget shortfall of some $600 million in the next fiscal year.
The recommendations included in Meacham's report to Gov. Brad Henry included allowing the state treasurer to purchase state and local bonds as investments and establishing a state guarantee program that would enhance bonds issued by state agencies and local governments in lieu of private bond insurance.
Meacham also suggested allowing state and local governments to issue general obligation bond issues through negotiated sales rather than the currently mandated competitive sales, and recommended seeking a constitutional amendment to enable school districts to issue debt above the current cap of 10% of net assessed valuation.
Legislation to enact the proposals has not yet been drafted, Meacham said. The recommendations were released two weeks before the 2009 Legislature convened Feb. 2,
"It's possible that we'll have something fleshed out by the end of the session that we could take to the Legislature," he said. "Some of them might be ready this session, but others are going to take some time."
The recommendations are contained in a report Henry asked Meacham to develop in October on how to protect the state's economic interests in a volatile market. The eight-page report also includes recommendations on strengthening pension systems and boosting state revenue by increasing the market for natural gas produced in Oklahoma.
Meacham, who is the governor's cabinet secretary for finance and revenue, said the proposals were developed after talking with local and state officials as well as experts in municipal finance.
"The goal is to enhance the ability of governments in this state to issue debt more efficiently, at a lower cost and a lower interest rate that would save taxpayer dollars," he said.
Changing state law to give local governments the ability to issue debt through negotiated sales would help them avoid some pitfalls in the market, according to the treasurer.
"In a competitive sale you don't know who the buyers are going to be on any given day," he said. "The buyers might be there, but they might not.
"That problem does not occur when underwriters are marketing the bonds through negotiations," Meacham said. "Negotiated sales give the issuers a little more flexibility than does the current system of mandated competitive sales."