Oregon.

Ballot Measure 5, the property-tax reduction measure approved by Oregon voters in November 1990, is causing financial problems for the state's school districts, Standard & Poor's Corp. said.

Of the 12 school districts in the state whose debt is rated by Standard & Poor's, half have incurred general fund operating deficits during the past two years, the rating agency said in yesterday's CreditWeek Municipal.

While no school district rated by Standard & Poor's in Oregon has seen its credit rating downgraded because of budget problems so far, credit concerns are looming.

"In the future, school district credit quality is likely to be squeezed, with ratings at the higher and lower ends of the scale converging somewhere in the middle," the article said.

The squeeze will occur "as each district's financial resources become more closely tied to, decisions legislature about funding levels and allocation formulas, and less closely tied to local credit factors such as tax base growth."

Measure 5 requires an school districts to reduce property tax rates, in equal increments over five years, to five mills in fiscal 1996 from 15 mills in fiscal 1992. Levies to pay voter-approved general obligation debt are excluded from the formula.

The state is required to offset the local revenue loss with increased financial aid, but state revenue has been insufficient to fully offset the loss, the article said.

The article added that the Oregon state legislature will convene in January to begin the process of adopting the state's 1995-1997 biennium budget, and "the issue of education finding will be prominent."

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