CHICAGO -- Michigan will return to the short-term note market within the next 60 days to borrow more than $500 million for cash-flow purpose, Nick Khouri, the state's chief deputy treasurer, said yesterday.
Mr. Khouri said that while no decision has been made on the size of the upcoming note issue, it would be larger than the previous short-term borrowing.
Lash March, the state sold a $500 million note issue backed by the state's general obligation pledge and an unconditional standby note purchase agreement from three Swiss banks. It marked the state's first cash-flow borrowing since September 1985.
Mr. Khouri said a request for proposals was sent out to underwriters for the negotiated issue last week, with responses due yesterday afternoon. The state also had sent out a request for bond counsel. The selection of the underwriting team and bond counsel would be done within a week, he added.
Prudential Securities Inc. was senior manager on the previous note issue, and Dickinson, Wright, Moon, Van Dusen & Freeman was bond counsel.
The decision to borrow in the tax-exempt market was made because it eas more cost-effective than borrowing internally at taxable rates, Mr. Khouri said. He pointed out that while the state has not seen the large increase in revenues from last year that was expected, key revenue sources, such as income tax withholding and sales and single business tax revenues, have increased "a bit."
Gary Olson, director of the Legislature's Senate Fiscal Agency, agreed that revenues have been coming in "weaker than expected."
"The concern I have now is the 1992 budget is based on 5.5% growth off the 1991 base," he said. The agency will be reviewing whether that 5.5% growth rate was "reasonable," given the weaker-than-expected economy.
State officials had been considering short-term borrowing for several weeks following the passage last month of a $7.7 billion general fund budget for fiscal 1992, which began Oct. 1. Subsequent vetoes by Gov. John Engler brought the budget down to $7.5 billion to match the administration's revenue estimates.
A partial restoration of vetoes is expected to be introduced today by the Senate Appropriations Committee, according to Guy Gordon, a spokesman for Senate Republicans. However, no decision on attempting veto overrides or introducing a supplemental spending bill has been made by House Democrats, according to Steve Serkaian, a spokesman for House Speaker Lewis Dodak, D-Birch Run.
One unresolved budget item is the elimination of the $230 million general assistance program for about 80,000 able-bodied single adults in the state from the fiscal 1992 budget. Earlier this month, Ingham County Circuit Court Judge James Giddings reinstated the program, ruling that the state had erred in the way it notified recipients that the program would be ended. The state's appeal of the ruling in the case brought by a group of general assistance recipients is currently being heard in the Michigan Appeals Court.
Meanwhile, a bipartisan group of state senators filed a lawsuit asking the appeals court to stop Judge Giddings from making so-called legislative rulings in the future.
The senators called the judge's general assistance ruling "a blatant violation of the constitutional separation of powers," according to Guy Gordon, a spokesman for Senate Republicans.
Michigan's GO debt is rated AA with a negative outlook by Standard & Poor's Corp. and A1 by Moody's Investors Service.