State of the States

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State of the States

• State Debt Management Network
• 12th Annual Conference

2
Alaska Arizona California Colorado Hawaii Idaho Mo
ntana Nevada New Mexico Oregon Utah Washington Wyo
ming
West
Robin Reedy Deputy Treasurer, Debt Management
Nevada State Treasurers Office
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Topics

• Economic Outlook
• Issuance
• Tobacco
• New Bond Programs
• Technology
• Other

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Economic Outlook

• Everyone seems to be experiencing a similar
  situation
• Colorado ..revenue estimates have consistently
  declined.
• Utah ..flat to minimal growth in 2002..
• Idaho soft economic growth..
• Oregon ..somewhat slower than the national
  economy in 2002
• California The slowdown has been most
  pronounced in the States high-tech sector and
  tourism industry.
• Projected combined budget gap for 2001-02 and
  2003-04 of approximately 12.5 billion (January
  2002)

5
Economic Outlook

• Everyone seems to be experiencing a similar
  situation
• Nevada
• YTD basis five largest revenue sources are
  45.8 million short of projections
• LSST collections of by 22.9 million
• Tourism collections have declined in 6 of past
  7 months
• February did grow at 8
• Forecast that General Fund revenue will be short
  of forecast by
• 76.6 million in current FY
• 72.1 million in FY03

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Economic Outlook

• States remain optimistic
• Utah
• Moderate growth in 2003
• Growth forecast for revenue sources
• Sales 2.8
• Personal Income 4.3
• Corporate Income 17
• Idaho 6.6 growth in revenue base. Gloomy
  numbers will be met with expense reductions.
• Nevada Read my lips, No new taxes complete
  review of revenue base.

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Economic Outlook

• States remain optimistic
• Oregon
• economy will outpace the national economy in
  2003 and 2004.
• Biennial General Revenue Fund growth is
  forecasted to increase 16.9 in 2003-2005.
• California
• ..through mid-January 2002, the states
  recession has been mild.
• Governor projects that economy will recover by
  mid-year.
• Projected revenue growth for 2002-03 (over
  2001-02)
• Taxable sales 7.5
• Personal Income 10.8
• Corporate 11.6

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Economic Outlook

• States remain optimistic
• California
• Reduction in Spending Plan
• Approximate current year impact of 2.4 billion
• Treasurer Strategic Debt Management Plan which
  has 3 components
• New bond issues
• Existing bond issues
• Variable rate debt
• Estimated 3-year cumulative savings of 2 billion

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Issuance

• Colorado
• TRANs 750 million
• Estimated 800 million for next year
• Utah
• 363 million GOs (208 was refunding)
• 125.9 million Lease Revenue
• Estimated 280 million GOs next year
• Idaho
• 250 million
• Estimated 300 million next year
• Nevada
• Since Jan 1, 2001 - 220 million
• More than 100 million in coming year

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Issuance

• Oregon
• First time issuing TANs on April 17, 2002. 778
  million at 2 yield
• 880 million of state bonds during calendar year
  2001
• State expects to sell over 1 billion during 2002
• California
• GOs 4.8 billion (2001), 3.9 billion (2002
  YTD)
• Lease Revenue 214.6m (2001), 229.1m (2002
  YTD)
• Revenue Bonds - 850.4m (2001), 691.3m (2002
  YTD)
• Conduit - 2.8 billion (2001), 2.3 billion (2002
  YTD)
• RANs none (2001), 5.7 billion (2002 YTD)

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Tobacco Settlement Monies

• Colorado

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Tobacco Settlement Monies

• Colorado
• Treasurer sought authority to securitize. Passed
  House but not Senate.
• Trust not projected to have sufficient amount of
  principal to fund ongoing programs until 2021.

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Tobacco Settlement Monies

• Utah
• CHIPS 5.5m
• Dept. of Health 4.0m
• Univ. of Utah Health Sciences 4.0m
• Drug Court 1.49m
• ? .51m
• Oregon
• Oregon Health Plan Medicaid Program (124m)
• Health Care Trust Fund (95m)
• General Fund balance (99m)
• Treasurer has proposed securitization

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Tobacco Settlement Monies

• California
• To General Fund
• 2002-03 Budget included plan to issue 2.4
  billion secured by a portion of settlement
  revenues.
• Assembly Bill 2353 introduced on Feb. 21, 2002
• Nevada
• Healthy Nevada 50
• Millennium Scholarship Fund 40
• Trust Fund 10
• Securitization
• 1st attempt failed
• 2nd attempt passed one house and stalled in the
  other.
• Try again this session

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New Bond Programs

• Idaho
• HB1174 Bond Equalization Program (school
  districts)
• Bond Guaranty Program
• Idaho Municipal Bond Bank
• Oregon
• Largest authorization in history for ODOT (500m)
• Lottery Bonds not new but will continue
• Biotech research Oregon Health Sciences
  University.

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New Bond Programs

• California
• Education
• 13.05 billion GO bonds on November 2002 ballot
• 650 million higher ed. lease revenue bonds in
  2002
• 12.3 billion GO bonds on November 2004 ballot
• Transportation
• High Speed Rail Bond Act of 2002 If passed, 6
  billion GO bond measure on November 2002 ballot

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New Bond Programs

• California
• Other
• Housing Bond measure 2.1 billion November 2002
  ballot
• Approved in March 2002
• 2.6 billion in GOs for California Clean Water,
  Clean Air, Safe Neighborhood Parks, and Coastal
  Protection Act of 2002
• 200 million in GOs for Modernization Voting Act
  of 2002

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New Bond Programs

• Nevada
• Permanent School Fund going strong
• GARVEE plan being pursued
• Debt service agreements/SWAPS and refunding
  always under analysis

19
Technology

• Colorado
• Electronic Bidding
• Electronic POS
• Idaho
• Electronic POS and OS
• Oregon
• Electronic bid only (competitive)
• Electronic POS

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Technology

• California
• Website to communicate with investors
• Electronic bidding
• Electronic POS

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Comments from the West

• Biggest issue that debt managers are facing
• ..addressing the economy with the rating
  agencies..
• ..maintaining ratings.. Finding ways on both
  sides of the balance sheet to infuse cash into
  the budget.

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Comments from the West

• Biggest issue that debt managers are facing
• Oregon
• Capital funding for schools
• Securitization of MSA revenues
• PERS bonding
• California Investor relations

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Illinois Indiana Iowa Kansas Michigan Minnesota Mi
ssouri Nebraska North Dakota Ohio Oklahoma South
Dakota Wisconsin
Midwest
James Joseph State Bond Advisor State of Oklahoma
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Topics

• Economic Outlook
• Issuance
• Tobacco
• New Bond Programs
• Technology
• Other

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Economic Outlook

• Michigan
• Mild recovery in 2002
• Moderate growth in 2003
• Forecast is above the national outlook
• Total wage and salary projected to grow 1.7 in
  03
• Illinois
• FY03 forecast 2 growth
• Lower FY02 base
• Revenue enhancements being considered
  (Legislative Session ends in May)
• Increase cigarette tax
• Riverboat gaming tax

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Economic Outlook

• Minnesota
• Feb. 02 forecast of revenue growth
• 0.2 for remainder of 02
• 2.8 in FY03
• Legislature still in session tax increase being
  debated.
• Indiana
• Expecting recession to end by July 2003
• Modest growth in 03
• Revenue growth
• 2.7 in FY03
• Considering tax restructuring proposals

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Economic Outlook

• Oklahoma
• Slow and stable
• 350 million less in revenue than FY02
• New taxes or revenue enhancements
• Tuition up 7
• Considering sales tax on services only in
  concert with personal income tax reduction
• Ohio
• Continuing moderate economic recovery
• 4.5 Revenue growth for FY03
• Cigarette tax increase of 0.50
• Certain focused business taxes
• Lowered revenue estimates for FY02/03 biennium

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Issuance

• Oklahoma
• 578.5 million (90 revenue bonds)
• FY03 estimate - 1.2 - 1.5 billion (605m in
  refunding)
• Indiana
• 66.6 million appropriation backed
• 37.3 million Indiana Bond Bank (moral
  obligation
• Future issuance
• Approximately 215 million of appropriation-backed
  
• Transportation Finance Authority - 300 million

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Issuance

• Minnesota
• 355 million of GOs
• Estimate for FY03 - 600 million. Amount may be
  higher based on Legislatures decision on
  transportation funding.
• Ohio
• 1.03 billion backed by General Fund
• Estimate for FY03 - 1 1.1 billion

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Issuance

• Illinois
• GO (new money) 1.5 billion. Issued 2 series of
  refunding bonds
• Build Illinois (new money) 150 million. Issued
  2 series of refunding
• Estimate for FY03
• GO - 1.7 billion
• Build Illinois - 200 million
• Michigan
• GO - 150 million
• Transportation - 500 million
• State building Authority - 500 million

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Tobacco Settlement Monies

• Michigan
• 75 to Michigan Merit Award Trust Fund
• 25 to Tobacco Settlement Trust Fund
• Securitization scenarios but nothing concrete
  all smoke right now.
• Illinois
• Earned Income Credit, Pharmaceutical Assistance,
  Smoking Prevention, Medical research
• No steps toward securitization
• Ohio
• 50 to school facilities and technology
• 5 to biomedical research and technology
• Remainder for public health programs
• No steps toward securitization

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Tobacco Settlement Monies

• Minnesota
• To the General Fund
• No plans to securitize
• Indiana
• Health care 60
• Trust Fund/Savings 40
• Analysis on securitization has been performed but
  no current plans
• Oklahoma
• Tobacco Settlement Trust Fund 50 (100 by
  2007) only earnings can be expended
• Analysis on securitization has been performed but
  determined not to securitize

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New Bond Programs

• Oklahoma
• Education Master Lease Program
• Transportation GARVEE before the Supreme
  Court
• Pensions Studied but no borrowing at this time
• Increasing acceptance of unconventional financing
  techniques
• Indiana
• Public Safety communication system
• Public Finance Office debt management policy
• Minnesota
• Major new spending for transportation being
  considered
• Ohio
• Greenspace (200m authorization)
• Brownfield (200m authorization)
• First variable rate obligation backed by the
  General Fund

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New Bond Programs

• Illinois
• Just talk right now on
• Pension bonds
• Tobacco bonds
• School construction bonds
• Short-term borrowing
• Michigan
• Education - Multi-modal GO issue
• Transportation Variable rate GARVEE program
• Clean Michigan Initiative issued GOs

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Technology

• Most states utilize electronic bidding,
  electronic POS and utilize their web site for
  financial information
• Indiana
• Has not issued debt competitively
• Distributes OS electronically

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The Midwest Speaks

• Comments from Biggest issue that debt managers
  are facing
• The ability to maintain a high credit rating
  during uncertain economic conditions.
• The effect of budget/financial situations on
  debt issuance, including the use of potential
  debt issuance solutions to budget woes.
• Effective disclosure and the economy and its
  impact on revenue and credit ratings.
• Maintaining our credit ratings.
• States have to balance capital projects and
  fiscal responsibility in the face of budget
  deficits.
• Depletion of state operating reserves.

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Alabama Arkansas Florida Georgia Kentucky Louisian
a Mississippi North Carolina South
Carolina Tennessee Texas Virginia
South
Donna Sanford Director, Office of Bond
Advisory State of Mississippi
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Topics

• Economic Outlook
• Issuance
• Tobacco
• New Bond Programs
• Technology
• Other

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Economic Outlook

• Common Themes
• Negative revenue growth for the first time in 50
  years.
• Slow to declining growth
• Current fiscal year has been reduced from
  original forecast
• Positive but slow
• Virginia
• Downturn not expected to be as severe because of
  increased government and defense spending
• FY03 and FY04 recovery may be less robust
• 2.5 decline from FY01 to FY02
• No new taxes but new sales and use tax on
  November ballot for transportation needs.

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Economic Outlook

• Tennessee
• Looking at new options
• Income tax at flat rate of 4.5
• Sales tax
• Increase state rate to 7 7.25
• Bring total to 9.75 10
• Wheel tax
• K-12 cuts dependant upon new budget
• Mississippi
• Growth estimated at 3.8 (from 0 for current
  fiscal year)
• No new taxes Provision for accelerated payments
  from major tax payers of sales, use and insurance
  premium

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Economic Outlook

• Kentucky
• Current FY growth revised to 1
• Addressing loopholes in Special Session
• Georgia
• 5 expected growth in FY03
• No new taxes

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Issuance

• Tennessee
• GO 150.6 million
• QAZBS 11.3 million
• FY03 estimate
• GO 100 million
• QZABs 9.8 million
• Florida Approximately 2.3 billion this year
• Georgia
• 1.04 billion this year
• 1.33 billion estimated for next year

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Issuance

• Kentucky
• Approximately 900 million in FY01 (lease
  appropriation)
• 660 in FY02
• Louisiana
• Expect to issue 450 million in upcoming year
• Mississippi
• YTD for FY02 413.2 million. 19 million to
  come.
• FY03 estimate
• 175 million in GOs
• 45 million in taxable GOs
• Nissan Project Approximately 80 million

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Issuance

• Virginia
• FY01 906 million
• FY02 684 million (YTD)

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Tobacco Settlement Monies

• Tennessee
• Used to fund current operations
• Virginia
• 50 to tobacco farmers, 10 to help restrict
  tobacco to minors, 40 to general fund for
  various programs
• 2002 General Assembly authorized sale of tobacco
  bonds
• Par amount approximately 726 million expected
  in FY03
• Tobacco Settlement Financing Corporation
• Mississippi
• Trust Fund
• 2002 Legislature transfer to Health Care
  Expendable Fund Medicaid
• Provision in amendment for repayment to Trust
  Fund under certain circumstances
• No securitization

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Tobacco Settlement Monies

• Louisiana
• Millennium Trust Fund School Boards and Early
  Childhood Education
• Securitized 60 - 1.2 billion issued in October
  2001
• Kentucky
• 50 to Agriculture Development
• 25 to Childhood Development
• 25 to Health Care Initiatives

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New Bond Programs

• Georgia
• Education 620.7 million
• Transportation 137.5 million
• Florida
• Environmental Purposes - 100 million per year
  for 8 years
• Economic stimulus package accelerated bonding
  for education and transportation
• Kentucky
• Bucks for Brains Appropriation supported bonds

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New Bond Programs

• Mississippi
• Refundings first taxable undertaken by state
• Nissan Project One year taxable notes
• Virginia 2002 General Assembly authorized a
  significant amount of debt
• GOs
• 900.5m for Education
• 119m for Parks and Recreations
• 106.6m for Higher Education
• Non-GOs Various Authorities
• Not State Debt
• 5.99 billion Hampton Roads Planning District
  Commission
• 2.8 billion Northern Virginia Transportation
  Authority
• Others Higher Ed, FRANs, Tobacco Securitization,
  Literary Fund

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Technology

• Most states indicate that they utilize electronic
  bidding, electronic disclosure and electronic
  distribution of POS and/or OS
• Kentucky
• CD transcripts
• Intranet for relevant documents
• No electronic bidding

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Comments from the South

• Biggest issue that debt managers are facing
• Mega-Projects Volume variety of issues/size
  of projects to be financed
• Public-Private Partnership initiatives
• Improved disclosure
• Maintain reserves when the state is experiencing
  an economic slowdown
• Maintaining credit in the face of declining
  revenues, an unstructurally balanced budget and
  deteriorating budget reserve fund.
• Maintaining current bond ratings given the
  economy and growing expenditure request from
  state government.

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Comments from the South

• Other information
• Tennessee
• Lottery on November ballot. Revenue to fund
  college scholarships
• Sales vs. Income tax for revenue
• Virginia
• Looking at Commercial Paper Program
• More evaluation of variable rate structures
• QZABs are inefficient and expensive
• Ancillary Contracts

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Comments from the South

• Other information
• Kentucky
• RANs Used Index tied to LIBOR
• Medium Term Note structure for debt service cost
  savings
• Swaps to hedge market risk
• Georgia
• Debt Management Advisory Committee
• Affordable debt ratios at 2.7 of personal income
  or maximum annual debt service less than 5 of
  general fund revenues
• Florida
• Legislature formalized debt affordability study
  requiring it to be update annually

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Connecticut Delaware Maine Maryland Massachusetts
New Hampshire New Jersey New York Pennsylvania Rho
de Island Vermont Washington DC West Virginia
East
Catherine Boone Assistant Treasurer State of
Connecticut
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Topics

• Economic Outlook
• Issuance
• Tobacco
• New Bond Programs
• Technology
• Other

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Economic Outlook

• New York
• Forecast for 2002-03
• Income tax receipts (-3.1)
• Sales tax receipts (2.5)
• Business tax receipts (4.4)
• Other tax receipts (-2.5)

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Economic Outlook

• Connecticut
• Diversification in the 1990s
• Employment peaked in July 2000 (unemployment rate
  of 2.2)
• Current unemployment at 3.5
• Economic growth projected in 3rd quarter of 2002
• Revenue estimates
• 6 - Sales and use tax
• -5 - Corporation tax
• Budget gap Who Wants to Tax a Millionaire?

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Economic Outlook

• Pennsylvania
• Economy typically tracks national economy
• Unemployment rates not up as high as national
  average
• Service sector
• Less exposed to industries impacted by September
  11th attacks
• Lack of growth in labor force
• Economy continues to diversify
• 2nd most diverse economy in the nation (Missouri
  1)
• Proposed tax reductions
• Capital Stock and Franchise Tax
• Expansion of Tax Forgiveness

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Economic Outlook

• West Virginia
• Lottery continues as one of the fastest growing
  revenue sources
• Mild net job losses
• Slower real income growth
• Estimate for FY03 1.7 for General Revenue Fund
  (down from 2)
• Maryland
• Started FY02 with 3.5 unemployment now at 4.4
• Well positioned to weather the recession
• Personal income growth 3.6 in 2002, 5.0 in
  2003.
• Tax reduction holds back revenue growth
• General fund revenues down by 1.9 in FY02

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Issuance

• Maryland
• 418 million. Projected to issue 400 million
  next year
• West Virginia
• Final 110 million of GO bonds (transportation)
  no more GO bond authorizations except
• 4 billion POBs will be issued as GO bonds
  Constitutional Question.
• Shift toward Lease Revenue Bonds (Economic
  Development Authority is issuing agency of
  choice)
• 200 million authorization
• Lottery seems to be favorite revenue source

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Issuance

• Pennsylvania
• Just over 1 billion last year. Projected to
  issue 709m in upcoming year.
• New York
• 2001-02 Approximately 2.1 billion
• Double projected for 2002-03 Approximately 4.2
  billion
• Connecticut
• Issued 1.621 billion in the past year
• Projected to issue 1.696 in upcoming year
• Slight increase in GOs
• Issuance of Clean Water

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Tobacco Settlement Monies

• Connecticut
• General fund to support health programs
• Trust Fund
• Bio-Medical Research Fund
• Proposed budget uses some of the Trust Fund and
  current year amounts to balance budget
• New York
• Primarily used to finance health care programs
• Pennsylvania
• Special Fund intended for health related programs
• Largest portion used for health care insurance
  for uninsured (30)
• Endowment Account within the Tobacco Settlement
  Fund extraordinary or emergency health care
  needs.
• Funds from Endowment Account used only on
  Governors proposal and approval by 2/3rds of
  each house of Assembly

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Tobacco Settlement Monies

• West Virginia
• 50 to Trust Fund, 50 to funds used primarily
  for health programs
• Trust Fund balance of 103.5 million
• Securitization legislation introduced in 2002
• House and Senate couldnt agree on allocation of
  proceeds
• Current needs vs. Pension funds (UAAL)
• Administration has said that legislation may
  appear again in 2003

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New Bond Programs

• West Virginia
• Economic Development Grant Committee
• Up to 200 million authorized for qualified
  projects
• Revenue source Lottery Funds
• POBs
• Legislature removed Supreme Court requirement
• Treasurer and Auditor expected to file suit
• Maryland
• Education
• QZABs issued 18 million

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New Bond Programs

• Connecticut
• UConn 2000 to be extended
• Funding at 1.3 billion
• Transportation Strategy Board
• Recommendations to the 2004 General Assembly
• Studying issues of funding and the states
  highway system
• New York
• State Personal Income Tax Revenue Bonds
• Secured by 25 of NY State Personal Income Tax
• Used for education, transportation, economic
  development, housing and state facilities.
• First issue in April 2002

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Technology

• Most states responded with the use of electronic
  bidding and electronic distribution of POS
• NY has procured DBC Debt Manager and Debt Finance
  for monitoring and management practices
• WV utilized electronic transcript for first time
  in July 2001.

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The Rest of the Story

• Comments from Biggest issue that debt managers
  are facing
• cost effectively managing debt service costs
  and timing new issuances in a market with a heavy
  supply of New York paper.
• improving upon disclosure and utilizing
  current technology..
• Disclosure
• Improving the procedures and concepts for
  secondary market disclosure.
• Managing issues related to deficits credit
  ratings. Responsible solutions to budget
  problems.
• Balancing priorities in this tight economy. How
  long can the state ride the Lottery gravy
  train?

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The Rest of the Story

• New York
• Debt Reform Act of 2000
• Various caps on debt based on personal income,
  governmental funds receipts
• Proposals that recommend a Constitutional Debt
  Reform Amendment
• Varied degrees of statutory caps and limitations
• Multiple GO ballots
• Authorize a limited amount of revenue bonds
• Variable Rate Debt and Interest Rate Exchange
  agreements
• No more than 15 of total debt outstanding
• Limits on use interest rate exchange (or similar
  agreements)
• Issuers must adopt guidelines for interest rate
  exchange agreements