NEW ORLEANS -- Alabama could issue $550 million of state debt for a proposed school building program as early as mid-1995, the state's top finance official said last Thursday.
Finance director James White said the first installment of Gov. Jim Folsom's expected $1.2 billion education borrowing plan could come before July.
As currently planned, the $550 million bond sale next year would be followed by the issuance of $350 million of bonds by 1997, with additional installments of $200 million and $100 million before 2000.
"It is essential to Alabama's future that we deal with improving our educational facilities, and I see moving forward with the borrowing plan as soon as possible as the best way to do this," said White, who made his remarks at a municipal bond conference held by Howard, Weil, Labouisse, Friedrichs Inc. in New Orleans.
Under Folsom's proposal, unveiled in February, the bonds would be sold by the Alabama Public School and College Authority, with debt service covered by sales, use, utility, and license taxes.
Proceeds would be used to fund new building construction as well as renovations to existing schools and equipment.
White acknowledged that the follow-through on Folsom's plan is contingent on his re-election as governor, and must be approved by the state legislature.
Most available polls last week showed Folsom, a Democrat, leading his Republican challenger, former Gov. Fob James, by more than 10 percentage points in advance of tomorrow's gubernatorial election.
So far this year, lawmakers have evaded the issue of funding education reform in two sessions -- a regular session that ended in April and a special session that followed.
Alabama is under the gun to implement a school reform plan following a ruling in April 1993 by Montgomery Circuit Court Judge Eugene Reece. Reece found that the state public education system violates the Alabama Constitution because it does not provide for adequate and equitably funded schools. Reece recently extended a deadline for school reform funding plan from Sept. 30, 1994, to March 15, 1995.
Folsom became governor shortly after Reece's order, when former Gov. Guy Hunt was forced to step down after being indicted on federal corruption charges. Folsom has responded to Alabama's education crisis by developing a plan that stresses local accountability, improvement of the capital facilities, increased teacher pay, and the development of technological resources.
White attributed the legislature's reluctance so far to approve the borrowing plan to "election year politics" and predicted that approval for the debt plan would come relatively soon after legislators meet in regular session next year.
"Legislators are sensitive to the fact that we have allowed our school facilities to deteriorate," White said. "I think they will be eager to deal with this part of the issue" by approving the bonds, he said.
The finance director noted that under the governor's proposal, the schedule of building projects to be funded with bond proceeds has already been set.
Market participants at the Howard Weil conference said they would probably welcome Folsom's proposed borrowing plan, which would nearly double the state's net debt. As of Sept. 30, the close of its 1994 fiscal year, the state had $1.31 billion in tax-supported bonds outstanding.
The debt includes $432.1 million of general obligation bonds and $870.2 million of limited revenue obligations. School authority bonds currently total $405 million.
"If Folsom's plan moves on schedule, there may be some initial skepticism about Alabama coming to market with so much so soon, but I think that buyers would welcome the bonds when they are sold because the state has relatively little debt outstanding," said one mutual fund portfolio manager, who declined to be identified.
White also said there could be another large Alabama revenue bond issue in 1995 to fund the state's first toll road planned in Shelby County. He said the issue would be about $300 million.
In his remarks Thursday, White also painted a picture of a second term under Folsom. He said that the governor, if elected, would try to reduce the size of the state's workforce. He also said that tax reform will continue to be a priority.
White said that the state ended its current fiscal year with a $20.4 million surplus. With the new needs, however, he predicted that the 1995 fiscal year would test policymakers.
"It will be tight in 1995," he said.