Oklahoma lawmakers critical of regents' Master Lease Program
BY WAYNE GREENE World Senior Writer
Friday, January 25, 2013
1/25/13 at 7:28 AM
OKLAHOMA CITY - A $116 million bond program that never got a vote by the Legislature or the people of Oklahoma may be on the cusp of approval.
After Attorney General Scott Pruitt's office found the approval process of the state Regents for Higher Education's Master Lease Program to be constitutional, if not necessarily good policy, the latest round of borrowing will go before the Oklahoma Council of Bond Oversight on Thursday.
While hurdles remain, including a potentially sticky position taken by State Bond Advisor Jim Joseph concerning the package's most controversial element, the lion's share of the program is moving forward, raising concerns among state debt hawks in the Legislature.
"The regents seem to have a blank check, and in the past 10 years they have used it like you would not believe," said Rep. Jason Murphey, R-Guthrie. "It is unbelievable, and it is very bad policy. I believe it was clearly the intent of the founders of this state ... that issues like this would have a vote of the people."
"Not only does it not have a vote of the people, it barely has the purview of the Legislature," Murphey said.
Here's how the Master Lease Program works: Every year the state regents submit planned projects - ranging from campus sewage lines to artificial turf for football stadiums - to the governor, the speaker of the House and the president pro tem of the Senate within seven days of the legislative session's beginning.
Any projects that aren't rejected by a concurrent resolution of the Senate and House within 45 days are deemed approved. Bonds to finance the projects are sold by the Oklahoma Development Finance Authority, which gets lease payments from the regents to service the costs.
While technically the bonds are not a state debt, future state higher education funding is pledged to pay the borrowed money.
Sen. Patrick Anderson, R-Enid, has proposed Senate Bill 158 to change the Master Lease Program.
Anderson's bill would not back out of past pledges - a total of nearly $1 billion in 10 years if all the projects currently approved by the regents are financed, he says - but would require a vote by the Legislature before future borrowing could begin. Also, the program would be limited to projects "for the primary benefit of the students and faculty of Oklahoma's colleges and universities."
The flash point project in the Master Lease Program is a $38.5 million plan to build a new home for the state Medical Examiner's Office on the campus of the University of Central Oklahoma in Edmond.
The current Medical Examiner's Office at the University of Oklahoma Health Sciences Center in Oklahoma City lacks key safety equipment and played a role in the 2009 decision by the National Association of Medical Examiners to take away the office's accreditation.
Inadequate facilities have made it difficult to attract qualified medical examiners, officials have said.
"They will not get their accreditation back in this location," said Sen. Clark Jolley, R-Edmond. "It just will not happen. It's a public safety and public health problem for the state."
Moving the facility to UCO not only will allow for needed improvements but is logical because it will be within walking distance of the Oklahoma State Bureau of Investigation's crime lab and UCO's Forensics Science Institute, he said.
Funding the facility through the Master Lease Program is a last resort but a legitimate one, Jolley said.
The Legislature has failed to act on proposals to fund the building through other borrowing means, and Jolley said he is still pushing a plan to transfer responsibility for the building payments to the Oklahoma Capitol Improvement Authority.
"That's the way the Legislature should have done it in the first place, if they're not going to pay cash for it," Jolley said. "People who object to use of the Master Lease will have an opportunity to get out of using it by doing it ourselves."
He said he isn't troubled by the Master Lease mechanism because the Legislature retains the right to stop any projects.
Joseph, the state bond advisor, has recommended that bonds for the UCO portion of the Master Lease Program be approved for sale only after the Legislature expresses its intent, in statute, to appropriate sufficient funds to the Medical Examiner's Office to pay for the program's costs, essentially moving the Legislature from a passive role to an active one for that project.
Jolley, chairman of the Senate Appropriations Committee, said that fits with his plans.
"Standard intent language" that the Medical Examiner's Office will have enough money to pay future rent payments can be included in an appropriations bill or a stand-alone bill, although it probably shouldn't be in the Legislature's general appropriation bill, Jolley said.
Anderson argues that the Master Lease Program is an unconstitutional means for financing the medical examiner's facility, which isn't really a higher education facility and should be paid for without more state debt.
Two years ago, when Anderson filed a resolution to reject Master Lease plans for the Medical Examiner's Office, UCO withdrew the proposal.
Last year, a similar resolution by Anderson challenging another attempt never got a legislative hearing in the Senate. Murphey offered a similar resolution in the House, but it was pulled from the legislative calendar just before it was expected to be considered and was sent to a committee, where it was killed.
If the full House had been allowed to consider the issue of bond funding for a medical examiner's building, Murphey says he thinks it would have been rejected, as other bond plans were rejected later in the session.
In May, Anderson asked the Attorney General's Office for an opinion on the program's constitutionality, and state bond officials put the Master Lease Program on hold, pending the outcome of that review.
Last month Pruitt issued a 26-page opinion that found that a plain reading of the Oklahoma Constitution shows that it intends state government to be run on a pay-as-you-go basis. However, the Master Lease Program falls into an exception recognized by the state Supreme Court, the opinion says.
"While it might be better policy for the Legislature to concurrently approve Master Lease bonds, ... the law does not require it," the opinion says.
As the law currently stands, the opinion says, the Master Lease Program is a legal means of financing an uncapped amount of state debt.
Anderson, who earlier this year brought a successful Supreme Court challenge to a state bonding plan to finance Arkansas River projects in Tulsa, said he doesn't agree with Pruitt's conclusion. A Supreme Court challenge of the Master Lease Program is likely, particularly if the Medical Examiner's Office is included, he said.
If the current bonding plan goes through, it sets a dangerous new means of increasing the state's debt without full consideration, Anderson said.
"It's just going to become a vehicle for getting around a legislative process and any scrutiny of what the project is at all," he said. "It's expanding into ... a whole new realm of what we're doing with it, plus it's being used by legislative leaders to build their pet projects."
State Regents for Higher Education Master Lease Program projects under consideration
Oklahoma State University information technology building: $5 million
OSU civil engineering building: $6 million
OSU property for future use: $2.5 million
OSU Institute of Technology (Okmulgee) water and sewer lines: $3 million
OSU-Oklahoma City parking garage: $4 million
Murray State College agriculture building: $6 million
Northeastern Oklahoma A&M College building renovation: $2 million
University of Central Oklahoma medical examiner's building: $38.5 million
UCO residence hall: $26 million
Northeastern State University residence hall: $20 million
Tulsa Community College aviation training facility renovation: $3 million
Total: $116 million
Source: Oklahoma Council of Bond Oversight
Original Print Headline: Lawmakers criticize regents' bond plan
Wayne Greene 918-581-8308
Sen. Patrick Anderson: He has proposed Senate Bill 158 to change the Master Lease Program. Anderson's bill would not back out of past pledges - a total of nearly $1 billion in 10 years if all the projects currently approved by the regents are financed, he says - but would require a vote by the Legislature before future borrowing could begin.
Rep. Jason Murphey: "The regents seem to have a blank check, and in the past 10 years they have used it like you would not believe," Murphey said. "It is unbelievable, and it is very bad policy. I believe it was clearly the intent of the founders of this state ... that issues like this would have a vote of the people."