Candidates in race for Ohio governor offer separate bond-funded school facility plans.

CHICAGO -- Two candidates for governor of Ohio have proposed massive bond-funded programs to renovate schools in the state.

Gov. George Voinovich, a Republican, is formulating a 10-year, $1 billion general obligation bond plan, while his Democratic opponent in the Nov. 8 election, state Sen. Robert Burch Jr., is pushing a plan to issue-up to $10 billion of GO bonds. Either plan would require voter approval.

Voinovich, who revealed his proposal last week, would create an Ohio School Building Authority to issue about $100 million of bonds a year over a 10-year period for renovation and construction of schools in the state's neediest districts.

According to a plan outline, the authority would assess facility needs among primary and secondary school districts and distribute necessary funding. The authority would be made up of the state treasurer, the superintendent of public instruction, the director of the office of budget and management, and other appointees.

Voinovich's plan would combine the school bonding referendum with a proposed change in the state constitution that would allow Ohio to issue GO bonds instead of lease-backed debt to fund capital projects.

Currently, Ohio funds most of its capital needs by issuing lease debt through the Ohio Public Facilities Commission and the Ohio Building Authority. A debt management plan completed for the state last year by the financial advisory firms of Evensen Dodge Inc. and Chase Edwards & Associates recommended restructuring the state's debt practices to take advantage of Ohio's double-A GO rating, which is higher than the ratings on the lease debt.

The study said the restructuring could save the state $100 million in interest costs over the next 20 years.

The Voinovich proposal would include a constitutional cap on the total amount of GO debt issuance. Under the cap, annual debt service would be limited to 5% of general fund expenditures. However, the cap could be exceeded with a two-thirds vote of the General Assembly.

Paolo De Maria, assistant director of the state's office of budget and management, said the governor is aiming to place the plan on the November 1995 ballot. He said the plan was influenced by a 1990 Ohio department of education study that identified about $10 billion of capital needs for schools.

In addition, he said, Ohio is appealing a recent Perry County Common Pleas Court decision that found the state's school funding system unconstitutional.

"This kind of proposal goes hand in hand with the education funding side," De Mafia said.

Burch has responded to Voinovich's plan by proposing to resuscitate legislation he co-sponsored last year in the General Assembly. It would ask voters to approve a constitutional amendment allowing for the issuance of $10 billion of bonds for public schools.

Jim Bleikamp, Burch's campaign spokesman, said that while $10 billion of bonding authorization would be requested, it doesn't mean that all of the authorization would be used. He said that decisions to issue the bonds would be based on the state's financial condition and amount of outstanding debt.

"We're not seeking to double the state's debt," he said.

Burch, a 10-year veteran of the Ohio Senate, also proposed calling an emergency session of the legislature to approve $1 billion of school construction bonds backed by state lottery revenues.

"These are Ohio school children that everything's falling down on, and I do not want to wait three or four years to act meaningfully as Voinovich proposes," Burch said in a press release. "I say let's act today to address this real problem."

Rating agency officials said Ohio does have some room to issue more GO debt. They also said Voinovich's debt restructuring plan would mark a big change for the state, which has needed voter approval for any GO debt issuance in the past.

George Leung, vice president and managing director of state ratings at Moody's Investors Service, said the state has the capacity, even with a 5% cap, to issue GO debt, which he said could be a more efficient and cheaper way for Ohio to access the debt market.

Joe O'Keefe, a director at Standard & Poor's Corp., said that issuing a reasonable amount of GO debt for schools would be "a positive development" for Ohio, where pressure for school capital projects has been building.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER