SAN FRANCISCO — The Oregon Legislature closed its February special session last week after approving $140 million of bond-financed construction projects — legislation that would enable the state to sell Build America Bonds — and a bill that expands the types of projects that can be financed with general obligation debt.

Lawmakers also approved fixes that close a $182 million gap in the $13.2 billion general fund budget for the 2009-11 biennium, in large part by tapping reserves.

They declined to act on Gov. Ted Kulongoski’s proposal to boost reserves by reforming the state’s tax rebate, or “kicker” law, during the 25-day special session.

“We accomplished what we came here to do,” said Senate President Peter Courtney, D-Salem. “We brought the state budget back into balance after a revenue forecast that was down and tackled important policy issues.”

The BAB bill could save Oregon $100 million in debt service over the next 20 years, according to its backers.

The legislation authorizes the state to deposit the federal government’s 35% BAB interest rate subsidy into state debt service funds and clears the way for the sale of almost $1 billion in BABs for the Oregon Department of Transportation this year.

BABs were created by the American Recovery and Reinvestment Act of 2009. Under the program, the federal government gives state and local governments a direct interest subsidy instead of the implicit subsidy included in traditional tax-exempt municipal bonds.

The bill also expands the types of nonprofit projects that can use tax-exempt financing issued through the Oregon Facilities Authority.

Lawmakers separately approved legislation that would allow the state to use general obligation bonds for some projects that it currently finances with certificates of participation. Treasurer Ben Westlund’s office estimated that the change would save $5 million for every $100 million of COPs that would be structured as GOs.

“These savings will provide real dollars that will help to solve real problems,” Westlund said.

Lawmakers also approved the sale of $65 million in bonds to renovate the Oregon DOT’s headquarters in Salem, and $75 million of bonds to build a 451-bed dormitory at the University of Oregon in Eugene. They estimate that the projects will create 600 jobs.

Lawmakers cut $30 million in general fund spending, as they sought to close a $183 million deficit during the special session, but they decided to use reserves to close most of the gap. Democrats had promised to keep education spending above $6 billion.

“Guaranteeing that our schools would receive the full $6 billion we promised last session, including the $200 million we set aside in reserves, was one of our top priorities,” said House Speaker Dave Hunt, D-Clackamas County. “Now school districts across the state will know they can count on stable funding for the next school year.”

Republicans lambasted the special session as yet another example of the Democratic majority’s free-spending ways.

“Unfortunately the business of Oregonians was ignored in favor of special interest politics and posturing,” said Sen. Ted Ferrioli, R-John Day. “Real issues like creating a rainy-day fund and fostering an environment where employers can grow and prosper were completely ignored.”

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