Oregon PERS Bond Bill Set for Expanded Voter Referendum

July 17, 2003 (PLANSPONSOR.com) - An Oregon state Senate committee temporarily turned aside a proposal for the legislature to seek authority for a general-obligation bond sale to refinance the state's pension fund debt until voters aprove it and future bond sales.

The Senate Rules Committee voted to put a question on a September 16 statewide ballot to get voter approval for the issuing of $2 billion in pension bonds and for future general obligation bond issues, according to the Salem (Oregon) Statesman Journal. That was a blow to Oregon Treasurer Randall Edwards and the House, who wanted to ask voters to approve the pension bonds and ditch the voter-approval requirement for future bond sales (See  Oregon Pension Bond Issue Under Consideration ).

Amended versions of House Joint Resolution 18 and House Bill 2651 will be sped to the Senate floor, in hope the measure can be signed by the governor Friday. That would meet a deadline to put the pension bond measure on the September 16 ballot.

The state will save $45 million per year by selling general obligation bonds to refinance $2 billion in debt for the Public Employees Retirement System (PERS), Edwards said. Over 24 years, that could save $1 billion. If voters reject the pension bond measure, Edwards said he would propose refinancing the PERS debt with certificates of participation. Those generally have an interest rate that is 0.1% higher than general-obligation bonds and don’t require voter approval.

“At the end of the day, the most important thing is we’re going to refinance a large liability for the state,” he said. However, Edwards was disappointed. He argued that the voter-approval requirement impeded the state from using low-cost general-obligation bonds to pay off some of its debts.

General-obligation bonds put the state general fund on the hook to repay bond buyers. That brings more certainty to investors and a lower interest rate for the state issuing the bonds.

The bonds would save $40 million over certificates of participation for the PERS refinancing, Edwards said. And if the Legislature had the authority to sell bonds instead of certificates of participation over the past decade, it could have saved $30 million, the treasury calculated.

Backers of the expanded voter approval requirement said it made prudent sense. “We need to restrict some of the things the Legislature can do in borrowing,” said Senator Roger Beyer, (R.-Molalla). “The Legislature doesn’t need a lower-interest-rate credit card.”

“You know what’s going to be happening if we open it up,” said Senator Ginny Burdick, (D-Portland). “We’re going to be funding schools” with bonds.

The Oregon Constitution has a longstanding provision requiring voter approval before the state sells general-obligation bonds for more than $50,000, other than for road projects.