Measure 72: and why is Ted Ferrioli so fiscally whacked?

Carla Axtman

Unless you're living under a rock--you know that the economic times are pretty tough in Oregon (and pretty much everywhere else in the US) right now. Things are looking rather grim when it comes to the state budget, so taking the savings where we can get it seems like an especially wise move. But apparently, not everybody is into the whole "saving the state money" thing. Take Oregon Senate Minority Ted Ferrioli, for instance.

One area where we could potentially save some scratch is the financing of state-funded construction projects. There are two general "tax-supported" financing mechanisms that we use:

1. General Obligation Bonds. These are backed by the credit and "taxing power" of the government as opposed to revenue from a given project. They come with a promise from the State to replay the bond. More here.

2. Certificates of Participation (COPs) are tax-exempt government securities used to raise funds to improve and construct buildings or purchase equipment. They don't carry a promise to repay, but instead rely on lease-financing arrangements; essentially, the facility being constructed is used as collateral. More here.

Lenders charge the State of Oregon interest on these based on how safe/risky it is. The safer the "bet", the lower the interest.

Betcha you can figure out which of these ultimately costs the state more in interest: COPs.

Under the Oregon Constitution, the state has a credit limit of $50k (this was done in 1859, btw.) So, General Obligation bonds are limited to $50k unless there is a specific extra allowance for them in the State Constitution. Over the years, a number of allowances have been created (see Articles XI-A, XI-B, XI-C, etc.)

Measure 72 does a number of things. First, it changes the constitution to allow the State of Oregon to finance projects that now have to be funded by COPs to move to the lower-interest-rate general obligation bonds. It also allows the State to refinance existing Certificates of Participation as lower-interest-rate general obligation bonds. It sets a limit for the total outstanding amount of these bonds to 1% of the real market property value of the state (but we should expect the practical debt limit would be much lower. It will be set by the State Debt Policy Advisory Commission). The state won't be able to impose a property tax in order to repay the bonds. And finally, M72 allows the legislature to put together legislation to implement the change.

The state saves money, the stuff we need (schools, prisons, roads, etc.) gets done...all is well. Right? Bzzzzzzt. Wrong.

Naturally, Ferrioli is against Measure 72. Presumably his opposition is a result of the fact that the Measure makes good fiscal sense. I know...everyone get all shocked at once.

Measure 72 actually weaved its way through the February legislative session as SJR 48. GOP Senate Minority Leader Ted Ferrioli voted 'no' on the bill. Apparently he meant it, because he also served as one of two opponents of Measure 72 on the legislative Explanatory Committee where two advocates and two opponents are required. The other opponent is Republican State. Rep. Dennis Richardson. The two advocates are Democrats: Senator Rosenbaum and Rep. Harker.

I honestly don't know why Ferrioli would be against this Measure, considering that he voted for SB 5505 in the 2009 session. SB 5509 authorized over $750 million in Certificates of Participation. It would appear that Ferrioli is perfectly cool with the state taking on the debt. It's the paying it back at a lower interest rate that has him flummoxed. Sources tell me that the difference is $38 million in tax dollars over the life of the debt authorized in 2009 (and those savings will, over time, overlap other issuances).

Republicans appear to reap the most benefits of the campaign largesse of the Oregon Bankers PAC, and there are some Dems on that list, too. COPs found on the State Treasurer's website show that the state uses a variety of banks (I didn't find financial institutions other than banks for these). It's possible that this is a "follow the money" situation. But it also seems like there's a measure of rank incompetence here as well.

To make things even more bizarre, Ferrioli had his knickers all in a bunch this week over a press release by State Treasurer Ted Wheeler cautioning the state against future public borrowing until the state's financial situation improves. Ferrioli's press release in response to Wheeler bordered on nonsense, especially given that Wheeler specifically cites $431 million the 2003 GOP-controlled legislature borrowed to pay for operating expenses that has yet to be fully repaid . So the state is paying $70 million a year through fiscal year 2013 pay that sucker off.

And who was the Senate Majority Leader in 2003? Ted Ferrioli.

Did he or his staff actually read Wheeler's press release? Have they actually read Measure 72? What is up with the Minority Leader...?

By Carla Axtman Sept. 30, 2010