An annual report by Oregon’s State Debt Policy Advisory Commission urges lawmakers to take “great caution” when using the state’s debt capacity over the next two-year budget cycle.

The commission said in the report released this week that the state will have at most $902 million in general fund support debt capacity available in the next upcoming biennium.

“Given the continued uncertainty regarding federal budget negotiations and the fragility of the economic recovery in Oregon and nationally, the commission urges that the Legislature and governor exercise great caution in the allocation of new general fund-supported debt capacity,” state Treasurer Ted Wheeler said in a letter to Gov. John Kitzhaber and lawmakers.

The commission said proposed changes to the federal tax code related to the treatment of tax-exempt interest or a stalled economic recovery could “substantially reduce the state’s long-term debt capacity.”

Last year, the debt commission advised policymakers that Oregon’s borrowing options remained highly constrained.

The state’s combined outstanding long-term general obligation, revenue and appropriation bond debt was $10.9 billion as of the end of June, down $398 compared to the end of fiscal 2011, according to the Debt Policy Advisory Commission.

Outstanding general fund supported debt was $2.9 billion by June 30, the report said.

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