Colorado bankers have already seen municipal bond underwritings drop in 1993 by one-third because of the tax and revenue limitation Amendment 1. Now it appears the state will borrow a lot less for its short-term revenue needs as well.

In 1992, Colorado sold $830 million in tax and revenue anticipation notes to fund temporary cash-flow shortages experienced by school districts. But this year, state officials say they expect only about $350 million to come to market as a result of a scaling back of a loan program for local school districts.

Under a loan program run by the state, school districts used to be able to borrow interest-free without demonstrating a need for the funds. That meant they were able to make arbitrage profits on their borrowings at state expense. Districts borrowed $580 million in the interest-free program.

State treasurer Gail Shoettler figures it cost the state $12 million in interest losses. She doesn't blame the districts for taking advantage of the program.

"They were arbitraging the state. They did as they should have done. But it didn't make any sense from the state's perspective," Shoettler said.

Shoettler persuaded lawmakers to close the loophole, and districts are now paid monthly as the need arises.

The other option open to districts is the state treasury pool, which accounted for $250 million in borrowings in 1992. It is a loan participation pool where the state guarantees repayment, giving it top ratings. The pool loans the money to districts cheaper than they could get with their lesser ratings.

The key question this year is how much the schools will need to get through the months when their cash flows are unbalanced. Shoettler estimates it will be $270 million.

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