02/25/2014

Oregon Taxpayers Reap Savings from School Bond Program

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In its 2014 Legislative Update, the Oregon State Debt Policy Advisory Commission recently reported an estimate suggesting that the Oregon School Bond Guaranty Program has saved Oregon taxpayers approximately $6.0 million per year, or $120 million over a twenty year period.  This State guaranty applies to local school district and community college debt service payments of $407 million, which is equivalent to approximately 5.9% of total General Fund revenues for the fiscal year, and 12.4% of overall state aid for schools and community colleges.

Source: State of Oregon State Debt Policy Advisory Commission 2014 Legislative Update

Source: State of Oregon State Debt Policy Advisory Commission 2014 Legislative Update (click to enlarge)

Since 2003, the amount of state school aid that has been diverted each year to pay school district pension obligation bond debt service has grown substantially.  The Commission projects that Oregon will divert approximately $229 million in state school aid for this purpose in FY 2014, or 7.0% of combined annual state aid for school districts and community colleges in the state.

The Oregon School Bond Guaranty Program benefits local governments and taxpayers with lower borrowing rates and provides investors with the additional security of a State Guaranty.  The primary cost of the program is the contingent liability presented to the state, which the Commission has recommended that limits be placed on the use of state aid and intercepts going forward.