State Debt Policy Advisory Commission asks lawmakers and governor to remain prudent with borrowing. Oregon’s solid credit rating and a recent history of budget discipline will translate to flexibility when it comes to state debt: The 2014 Oregon Legislature will have the option to sell substantial bonds while remaining within the state’s prudent debt capacity limit, according to the State Debt Policy Advisory Commission.
Based on revenue forecast and estimated interest rates, the Commission said the state can prudently allot a maximum of $215 million in additional General Fund-backed debt for the remainder of the 2013-15 biennium.
In addition, the Commission projects that based on the current Lottery revenue forecast, there remains up to $96 million in remaining lottery capacity this biennium. However, the Commission also recommended a judicious approach to any new Lottery-backed debt because of the potential impact to the operating budgets that rely on lottery proceeds.
Oregon’s adherence to a debt limit has helped to strengthen the state’s credit rating – allowing the state to obtain more favorable interest rates, when the Legislature opts to sell bonds.
“Oregon’s discipline is saving taxpayers millions, and also is helping to stretch our limited public funds further. As a result, we can finance additional investments that will make Oregon stronger,” said State Treasurer Ted Wheeler, the chairman of the State Debt Policy Advisory Commission.
“All Oregonians will benefit, today and in the future, if we continue to use bonds wisely and strategically,” said Rep. Phil Barnhart, D-Eugene, a member of the five-member commission and the chair of the House Revenue Committee.
Added State Sen. Richard Devlin, D-Tualatin, a commission member and the co-chair of the Joint Ways and Means Committee: “We are managing Oregon’s debt carefully and it has given us the ability to meet the most pressing needs of our citizens today, and to build critical infrastructure for tomorrow.”
The state’s general obligation credit ratings are AA+/Aa1/AA+ ratings by Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service respectively. The rating for Lottery-backed Oregon debt is AAA from S&P and Aa2 from Moody’s.
The commission advises the Legislature and Governor about the prudent level of state debt repaid by the General Fund and Oregon Lottery revenues. It also makes general recommendations about improving how Oregon prioritizes its debt, and protecting the state’s credit rating.
Oregon is finally clear of a debt incurred 11 years ago, and it gives state leaders more options when it comes to public borrowing capacity.
To balance the state’s operating budget during the 2003 recession, legislators borrowed $432 million, a controversial move that solved an immediate need yet impacted budgets for following decade.
The move was not regarded highly by credit rating agencies, which downgraded the state for several years afterward. The improving state budget and expiring bonds means the
The Commission’s Annual Debt Capacity Report provides policymakers and interested parties with a source of information regarding the various debt and long-term capital financing programs used by the State of Oregon to fund its various capital needs.
It can be found online Here.
Public borrowing is a powerful tool that can create jobs in the short term while improving roads, colleges and other public facilities. But bonds need to be repaid, with interest, so the commission makes recommendations about how much public money should be devoted to loan repayment, in order to keep annual payments at a manageable level.
Recommendations for the state debt capacity targets are key benchmarks and reinforce confidence that Oregon will repay its loans — and are among several factors that help to determine the state’s credit ratings. Oregon’s ratings are currently solid, and are helping to keep interest costs low on projects for which the state anticipates issuing bonds to fund.
The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council.
The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury.
