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Business Q&A -- Randall Edwards

Randall Edwards is Oregon's State Treasurer

What are the various sources of income for the state and what has been the state's income from these sources in recent years?

The state generates revenue to pay for essential services from five sources: federal funds, general funds, tobacco funds, lottery funds, and other funds.

Federal funds account for about 19 percent of the state budget. General funds are derived largely from personal and corporate income taxes (85 percent from personal income and 8 percent from corporate taxes) with the rest coming from the insurance premium tax, gift and inheritance tax, cigarette tax, liquor tax, investment earnings, and other minor sources.

The general fund covers approximately 33 percent of the state's budget expenses. Tobacco funds consist of money paid to the state under the master settlement agreement entered into between Oregon and the tobacco industry in November of 1998. The tobacco industry is to make payments to the state each year in perpetuity. These payments are estimated to total $2.2 billion through 2025.

Tobacco funds account for approximately 0.4 percent of the state's budget. Lottery funds account for about 1.6 percent of the state's budget. Most of the lottery revenue is derived from video poker games. Other funds consist of taxes and fees, most of which are dedicated to a specific purpose such as highway use, and the state's business-like income, such as tuition and other fees for services, inmate work product, and funds related to bonds or loans. Other funds account for approximately 45 percent of the state's budget.

What sources do you consult when investing the state's revenue?

The Treasury is responsible for managing a variety of state funds worth more than $45 billion. The $36 billion state pension fund is the largest and most complex of the funds we manage.

My office has long been seen as a national leader in managing public funds. The Oregon pension fund was one of the first public funds to invest in stocks and was one of the first investors in the famous KKR firm. These investments have paid off very well for the state. To manage these funds, I have a highly professional staff with years of investment experience that helps to oversee the management of state resources. The Treasury has a long history of using the private sector in helping us to manage and invest the billions of dollars entrusted to us. These money managers are some of the best in the business. My job is to ensure that we hire the best managers to get the best returns we can for the state.

You talked about taking advantage of low interest rates at the Oct. 15 Chamber Forum in Medford. What are the various ways the state can stretch its dollars now and at other times?

When we borrow through bonds to pay for (state) projects, we pay interest on the bonds. Because of the prudent way we manage these bonds, the state has a good credit rating, which means we pay very low interest rates on the bonds. Protecting the state's good credit is a top priority for me because it saves taxpayers millions of dollars each year. In fact, through a school bond guaranty program, I offer the state's low interest rate to school districts throughout Oregon to help lower their cost of borrowing, which has saved more than $100 million over the last couple of years.

I believe the state should take advantage of the very low interest rates right now and issue more bonds to help Oregon's economy.

What sector do you see leading the state's economy out of the current recession?

Throughout the 1990s, Oregon was one of the fastest-growing economies in the country. Southern Oregon also shared in this rapid expansion. During that time, the state was able to attract new industries that made our economy more diverse and more stable than in the past. Most notable were the billions of dollars invested by technology firms in Oregon. The technology sector is now the largest employer in the state and plays a critical role in our economy.

A diverse economy will help us to survive this economic downturn. However, Oregon does depend on other countries and states to buy our products, so we will need to see a national recovery to really pull Oregon's economy up. One area that should benefit is our wood-products industry. Oregon remains one of the major timber producers in the country and the low interest rates that the federal government has put in place should increase the building of new homes around the country.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail