By CHARLES E. BEGGS
Of The Associated Press
SALEM - The state's debt has jumped in recent years, mainly because of problems in the deficit-plagued public employee pension fund, giving Oregon the 11th largest debt burden among the states, financial officials say.
Oregon's tax-supported debt - debt backed by various taxes such as income or gas taxes - stood at about $4.9 billion as of June 30. That was up from about $2.4 billion two years earlier, according to the state Debt Policy Advisory Commission.
The current debt level amounts to about $1,360 for every person in Oregon.
The big reason for the increase was $2 billion in pension bonds sold to pay the state's share of the Public Employee Retirement System's "unfunded liability."
That's the shortfall between revenue that the pension plan expects to have and what it will owe in benefits to state and local public employees over the long term.
The pension fund, battered by investment losses during the recession, once had a long-term deficit projected at $17 billion. That has dropped to an estimated $1.7 billion, due mostly to an improved economy that has boosted stock and other investment earnings plus pension reforms enacted by the Legislature.
The other major reason for the debt increase was $430 million in bonds that were sold to pay state government's operating costs and avoid a budget deficit during the recession in 2003.
Taking those things together, Moodys Investors Service, a New York bond rating house, ranked Oregon as having the 11th-highest tax-supported debt among the states at the end of 2004.
Laura Lockwood-McCall, the state's debt manager in the state treasurer's office, said credit rating agencies don't like seeing bond borrowing being be used to pay short-term operating expenses.
She said the concern of credit rating agencies is "not that you issue debt, it's how you're using it."
But she said including pension bonds in ranking state debt can be misleading.
Many states have unfunded pension liabilities after taking hits in the stock market downturn in recent years, she said. But some states haven't issued bonds to deal with the deficits, so the pension liabilities don't show up as debt.
Disregarding the pension bonds would cut Oregon's per capita debt about in half and put the state around the middle of the states in tax-backed debt, she said.
Examples of the other debt are bonds to fund veteran's home and farm loans that are repaid by mortgage payments and borrowing to build college facilities that is repaid by such revenue as student fees and dormitory rental charges.
She said the 2005 legislative session that ended Aug. 5 took positive steps by not borrowing to cover operating expense and instead authorizing bonding for more conventional purposes - transportation projects and university and community college upgrades and expenses.
As for local governments around Oregon, a May 2005 Moody's report said Oregon cities' debt levels, aside from any pension bonds sold, "are quite modest compared to the national levels."
The report said the credit strength of the state's cities "is generally derived from sizable tax bases, low debt levels and history of stable and healthy general fund balances despite frequent tax-limiting voter initiatives."
