CHICAGO -- Iowa's budget problems may delay issance of $400 million of tax and revenue anticipation notes this summer to pay for school aid and other bills, state Treasurer Michael Fitzgerald said yesterday.

The Trans are scheduled to be issued July 1, which is the start of the state's fiscal 1993, Mr. Fitzgerald said. The one-year notes are issued annually.

Gov. Terry Branstad has been working on alternatives to help finance the state's $3.47 billion general fund budget since he vetoed a proposed one-cent sales tax increase last month that would have generated an estimated $272 million in the upcoming fiscal year.

The sales tax increase would have enabled the state to set aside $60 million to reduce the state's $338 million deficit as measured by generally accepted accounting principles.

The governor is expected to announce an alternative plan sometime today, which is his deadline to sign or veto bills.

Mr. Fitzgerald said quick resolution of the budget problem is essential so work can begin on calculating the Trans, a process that takes two to four weeks. In addition, the lack of a balanced budget could make receiving credit enhancement on the Trans "much more difficult," he said.

The state plans to seek a letter of credit for the issue.

A delay in issuing the Trans could force schools to make cuts in their budgets and pay more interest on their bills, according to the treasurer. "The more delay, the greater the hardship on schools," Mr. Fitzgerald said. "More delay means more interest costs they have to bear."

The schools have been counting on the state to help them catch up with at least three months' worth of bill payments in July, according to Bill Sherman, public relations specialist for the Iowa State Education Association.

"A delay in the bond sale would create some problems, no doubt," Sherman said.

In May, Gov. Branstad vetoed a proposed sales tax increase to 5% from 4% that would have enabled the legislature to reduce the state's $338 million GAAP deficit without slashing spending in other areas.

Richard Vohs, Gov. Branstad's press secretary, has said the governor vetoed the measure because he was "committed to getting spending reforms that will assure balanced budgets in the year ahead and into the future.

Under a state law passed in 1989, the state is required to eliminate its GAAP deficit by the end of fiscal year 1993. State officials have said the deficit's size makes the deadline impractical.

In May, legislators delayed eliminating the entire GAAP deficit until fiscal 1995.

Last year, bond insurers cited the GAAP deficit as one reason they refused to provide credit enhancement on a $91 million Iowaa certificates of participation issue. the state eventually persuaded AMBAC Indemnity Corp. to insure the issue. and the certificates were wold in April.

Mr. Fitzgerald said that case will not have any bearing on credit enhancement for the $400 million Trans issue.

The co-senior manager and book-runner for the Trans deal is Goldman, Sachs & Co. The other co-senior manager is Lehman Brothers. Davis, Hockenberg, Wine, Brown, Koehn & Shors, P.C., is the bond counsel.

Co-managers are Artemis Capital Group Inc.; Bear Sterns & Co.; Dougherty, Dawkins, Strand & Bigelow Inc.; the Principal/Eppeler, Gueren and Turner Inc.; R.G. Dickinson & Co.; the First Boston Corp.; Dain Bosworth Inc.; Kirkpatrick, Pettis, Smith, Polian Inc., Norwest Investment Services; Piper Jaffray Inc.; and Ruan Securities Corp.

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