Q: Some lawmakers are talking about requiring legislative approval before citizens can try to gather signatures for initiatives to change the constitution. Would you support this?

A: I don't support it. The problem is not the initiative process. The problem is what it's being used for. For example, supporters of Measure 20 are trying to find a sort of simplistic way of financing the state's needs. Measure 20 has heavy grassroots appeal. I seriously doubt the people who put together the 2% tax plan were thinking about how the measure might affect our bonding authority or the state's rating.

Q: What is your opinion of the voter initiative process?

A: The initiative process is very important. I personally would not want to make the initiative process more difficult for people. If you make it more difficult, the people who are the professionals will do it. It will just make it harder for everybody else. You should not be afraid of the people being able to have access to the system. As much as I dislike some of these measures, I would not want to cut off their access.

Q: When investors look at Oregon's initiative process and see some of the more controversial measures on the ballot, isn't it natural for them to think twice about investing in the state's bonds?

A: The first thing I would say is that one of these [citizen petition] initiatives has passed -- Ballot Measure 5, not the current one, but the previous one [a 1.5% property tax limitation measure approved by voters in November 1990]. Oregon addressed it very responsibly. The legislature implemented it, basically to the letter of the law. When offering debt, the treasury has been very responsible in operating in whatever environment we face.

Basically, you have a collision of two worlds that in many ways are not very compatible. You have a collision of politics and finances. With politics is a world of uncertainty. And finances do not like uncertainty. You are seeing this throughout the country. This kind of thing is happening everywhere.

What you do is, you let the politics run their course. You see if some of these things pass, or not. And then you see what kind of response we have to it. I think if [the initiatives] do not pass, you probably will see less of this kind of thing in the future.

Q: If Measure 20 wins, it takes effect on Jan. 1. Can you get it in place within that required 60-day time frame?

A: I think that would be impossible .... I will tell you flat out that I am opposed to Measure 20. It does not raise the funds that are needed to support the budget under the state's current needs.

Q: Under Measure 20, the state treasurer would become an "executive of operations" overseeing the revenue department, which would collect the 2% tax. Some observers believe this would make the treasurer the most powerful government official in Oregon.

A: In a sense, it might be in my interest to want to have the thing passed. I get the department of revenue, and I have the legislature report to me. But it's bad policy.

Let me add that the people who sponsored the measure never came and talked to us at all. Even though they are giving the treasurer all of that power.

Q: What is the definition of "equal tax" under Measure 207

A: It is a transactions tax, or a sales tax, whatever you want to call it. It is flat tax and everybody pays it. It basically abolishes all other taxes, so everybody pays. the same 2% rate on all their transactions.

Q: It repeals existing state and local taxes, fees, assessments, and tolls and replaces them with a 2% tax on almost all transactions.

A: It just about eliminates all other taxes. People are looking for the simple, broad-based tax, and that's why they call it the equal tax.

Q: On Aug. 16, the Oregon Bond Bank sold $5.69 million of revenue bonds in a competitive deal won by a Lehman Brothers group with a true interest cost of 5.9375%. Eight other syndicates bid for the bonds. Do you think some of the losing bids were high because the groups were charging a premium for their concern about the initiatives?

A: I'm not sure. I don't know if you can say very much from one sale. The. fact is, we got a decent rate on our bonds, and we're very pleased with it. It is very significant that we had a number of bids. That shows some confidence in the state and how we handle our finances. I don't know if I would attribute too much beyond that.

Q: Kemper Securities Inc. issued a research report this month written by vice president Thomas Orphanos that said Measure 20 supporters favor radical tax reform in Oregon. Would you characterize Measure 20 as radical?

A: Yes.

Q: Are you asking voters to reject Measure 5, Measure 15, and Measure 207

A: We're asking. them to reject Measure 5 and Measure 20. With respect to Measure 15, in terms of its direct impact on state finances, that is a very different kind of measure. That sets a type of priority for government spending, which is a very different thing.

Q: What is your position on Measure 15, the initiative to provide minimum state funding of schools?

A: I am not supportive of Measure 15. The budgeting process is the way to set priorities. I was in the legislature for 10 years. The legislature is in the position to see what the priorities should be. Although education should have one of the highest priorities, I can't say I would sacrifice everything else right off the top for education.

Q: Do you believe there will be years of legal wrangling to work out issues if any or all of the measures are approved?

A: I know that would be the case for Measure 5 because bond counsel firms already have talked about that. Off the top of my head, there is a good chance there would be litigation surrounding Measure 20. I just don't know about Measure 15.

Q: The Kemper report said Measure 20 would have an impact on fixed-income investing. The report said the measure would impose a quarter of 1% tax on secondary market trading. What is your response to this analysis?

A: I don't know whether those things are true. Before people start over-analyzing [Measure 20], we have to see if this thing is going to make it onto the screen of the voters. Measure 20 is behind in the polls.

Q: What can you do to build the public's confidence in Oregon's government? Are you saying if it's not broken, don't fix it?

A: You can always get better. I am trying to show that the Oregon treasury is handling the state's finances responsibly. [The Bond Buyer is] familiar with how we handle our bond process here, and you know we do a damn good job. I say that with absolute certainty and clarity.

Q: At the same time, the rating agencies are raising red flags about the Oregon initiatives.

A: That brings me back to my fun-damental point: I don't think most of the people who [signed petitions to qualify] these measures were thinking about Oregon's bonding. Let's be fair. Do not say that people are out trying to destroy the bonding process .... You cannot separate politics from government finance. They are totally related. People who are evaluating what is going on in Oregon need to understand that.

Q: AND A:

If Oregon's voters say yes in November, Measure 20 could make Jim Hill the most powerful politician in the state. But that doesn't mean he likes the initiative.

Hill is Orgon's treasurer, and Measure 20 would rewrite the state constitution to replace just about all of the state's taxes with a 2% flat tax that his office would collect. Hill says that would be bad policy.

So far, polls show Measure 20 is behind, but the rating agencies have their eye on it. Standard & Poor's Corp. and Moody's Investors Service said a yes vote on Nov. 8 will make them review state and local ratings.

About $10 billion of state and local debt is outstanding in Oregon, of which about $4.7 billion is state general obligation debt rated Aa by Moody's and AA- with a negative outlook by Standard & Poor's.

Oregon has 17 initiatives on its ballot, the most since 1914. Citizen signature-gathering drives put 15 of the initiatives there, while the legislature accounted for the other two.

The three measures that would have the biggest effect on Oregon finances are all citizen efforts. measure 20 is one. Another, Measure 5, would require voter approval for any tax or fee increases, including any state or local taxes backing bond issuance. The third is Measure 15, which would amend the constitution to set a minimum level for state spending on public schools and community colleges.

Sources say some bond insurers are holding off on providing Oregon issuers with credit enhancement until the measures are safely voted down.

A number of issuers, particularly school districts, are queuing up to prepare bond deals before election day because they're not sure what will happen after the election.

Some Oregon politicians, tired of worrying about "budgeting by initiative," want to make it harder for initiatives to amend the constitution. Right now 89,028 valid signatures are needed to get a proposed constitutional amendment onto the ballot.

Hill, elected treasurer in November 1992, opposes initiatives 5, 15, and 20 but he defended the initiative process in a recent interview with Brad Altman, Western bureau chief for The Bond Buyer.

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