Oklahoma City, OK 73105
For Immediate Release: March 22, 2017
approved to give Legislature better look at state debt
Oklahoma Legislature would have a better picture of total state
debt under a measure passed unanimously Tuesday. Senate Bill 638,
by Sen. Greg
Treat, would require the State Bond Advisor and the Office of
Management and Enterprise Services to produce an annual written
debt affordability study to be presented to the Legislature and
Governor by January 15 each year.
“Having this annual study would provide the Legislature with
a clearer understanding of our long-term state debt so that we can
make more fiscally responsible decisions not just for the next few
years but for future generations,” said Treat (R-Oklahoma
City). “We have an obligation not only to the citizens of
Oklahoma today in providing crucial state services and being good
stewards of their tax dollars but we must also work to create a
stronger Oklahoma for our children and grandchildren.”
The study would include the state’s debt relative to its benchmark
debt ratio, which caps debt service at five percent of revenues.
It would combine existing reports, such as the Bonded Indebtedness
Report and the State Bond Advisor Annual Report, to analyze Oklahoma’s
debt position. Data would include net tax-supported and net revenue-supported
debt for the most recently concluded fiscal year as well as the
debt for state major component units and agencies for which the
state may hold ultimate financial responsibility such as the Oklahoma
Housing Finance Agency, the Oklahoma Turnpike Authority, and the
Oklahoma Municipal Power Authority.
The bill requires the study to include projections of debt service,
future debt issuance, and debt to capacity (such as debt service
as a percentage of revenues). Each projection would extend at least
five years from the fiscal year of the study’s publication.
Also included in the study would be a discussion of Oklahoma’s
unfunded pension liabilities and the impact of these liabilities
on the state’s ability to borrow and the cost of debt. The
study would identify and calculate relevant metrics including debt
service as a percentage of revenues, total debt as a percentage
of state personal income, and total debt per capita. Analysis would
compare debt metrics to a select group of at least ten other states.
A sensitivity analysis would also be conducted to understand the
effects of uncertain conditions including, but not limited to, analysis
of the impact of revenue and interest rate volatility on debt ratios.
Finally, it would provide an estimate of available debt capacity
Oklahoma could issue over the next five years without causing the
benchmark debt ratio of debt service as a percentage of revenues
to exceed five percent.
The proposed debt affordability study would make Oklahoma one of
28 states to provide such research.
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